from our studios in the heart of Silicon Valley Palo Alto California this is a cute conversation welcome to the cube studios for the cube conversation where we go in-depth with thought leaders driving business outcomes with technology I'm your host Peter Burris digital business and the need to drive the value of data within organizations is creating an explosion of technology in multiple domains systems networking and storage we've seen advances in flash we've seen advances in HD DS we've seen advances and all kinds of different elements but it's essential that users and enterprises still think in terms not just of these individual technologies piecemeal but as solutions that are applied to use cases now you always have to be aware of what are the underlying technology components but it's still important to think about how systems integration is going to bring them together and apply them to serve business outcomes now to have that conversation we've got David Fleur who's the CTO and co-founder of wiki bond and my colleague David welcome to the cube thank you very much Peter all right so I've just laid out this proposition that systems integration as a discipline is not gonna go away when we think about how to build these capabilities that businesses need in digital business so let's talk about that what are some of the key features of systems integration especially in the storage world that will continue to be a helps differentiate between winners and losers absolutely so you you need to be able to use software to be able to combine all these different layers and it has to be an architect software solution that will work wherever you've got equipment and where have you got data so it needs to work in the cloud it needs to work in a private cloud it needs to work at the edge all of these needs to be architected in a way which is available to the users to put where the data is going to be created as opposed to bring it all in in one super large collection of data and so we've got different types of technology at the very fastest we've got DRAM we've got we've got non-volatile DRAM which is coming very fast indeed we've got flash and there are many different sorts of flash there's obtained from Intel that may be trying to get in between there as well and then there are different HD DS as well so we got a long hierarchy the important thing is that we protect the application and the operations from all of that complexity by having an overall hierarchy and utilizing software from an integration standpoint but it suggests that when an enterprise thinks about a solution for how they store their data they need to think in terms of as you said first off physically where is it going to be secondly what kinds of services at the software level am I going to utilize to ensure that I can have a common administrative experience and the differentiated usage experience based on the physical characteristics of where it's being used and then obviously and very importantly from an administration standpoint I need to ensure that I'm not having to learn new and unique administration practices everywhere because I would just blow everything up absolutely but there is a real there's going to be in my opinion a large number of these solutions out there I mean one data architecture is not going to be sufficient for all applications they're gonna have many different architectures out there I think it's probably useful just to start with one as an example in this area just let's take one as an example and then we can see what the major characteristics of you are so let's take something that would fit in most places a mid-range type solution let's take nimble nimble storage which has a very specific architecture so it was started off by being a virtualization of all those different layers so the application sees that everything is in flash and in cash or whatever it is but where it is is totally different it can be anywhere within that hierarchy so the application sees effectively a pool of resources that it can call yes all it sees and and it doesn't know and nobody and it doesn't need to know that it's on disk or a hard disk or in in memory in in in a cache inside the controller or wherever it is so it starts with using nimble as an example nimble is successfully masking the complexities and specificities of that storage heart and from the application right so so and and that's an advantage because it's simpler but it's also needs to cover more things you need to be able to do everything within that virtualized environment so you need for example to be able to take snapshots and you the snapshots need all the metadata about the snapshots needs to be put in a separate place so one of the things you find that comes from this sort of architecture is that the metadata is separated out completely different from the actual data itself but still proximate to the data because data locality still matters absolutely has to be there but it's in a different part of a hierarchy it's much further up the hierarchy all the metadata so what we've got the metadata we've got the flash high speed we've got the the fastest which is the DRAM itself that when for writes is has a protection mechanism for that that part of the DRAM specialized hardware in that area so that allows you to do writes very very quickly indeed and then you come down to the next layer which is flash and indeed within the in the in taking the nimble example you have two sorts of flash you can have the high-speed flash at the top and if you want to you can have lower performance flash you know using the 3d quad flash or whatever it is you can have lower performance flash if that's what you need and then going lower down then you have HD DS and the architecture combines the benefits of flash with the character and the characteristics of flash with the benefits of HD d which is much lower cost but the characteristics of HD d which are slower but very suited to writing out large volumes or reading in large volumes so that's read out to the disk but where where it's all held is held in the metadata so it's really looking at the workloads that are going to be they're gonna hit the data and then with out of making the application aware of it utilizing the underlying storage hierarchy to so best support those workloads again with a virtualized interface that keeps it really simple from an administration development and runtime perspective actually all right David foyer thanks very much for being on the cube and talking about some of these new solution-oriented requirements for thinking about storage over the next few years once again I'm Peter Burris see you next time you [Music]

>> From theCUBE studios in Palo Alto in Boston, bringing you data driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. >> In the words of my colleague CTO David Nicholson, Broadcom buys old cars, not to restore them to their original luster and beauty. Nope. They buy classic cars to extract the platinum that's inside the catalytic converter and monetize that. Broadcom's planned 61 billion acquisition of VMware will mark yet another new era and chapter for the virtualization pioneer, a mere seven months after finally getting spun out as an independent company by Dell. For VMware, this means a dramatically different operating model with financial performance and shareholder value creation as the dominant and perhaps the sole agenda item. For customers, it will mean a more focused portfolio, less aspirational vision pitches, and most certainly higher prices. Hello and welcome to this week's Wikibon CUBE Insights powered by ETR. In this Breaking Analysis, we'll share data, opinions and customer insights about this blockbuster deal and forecast the future of VMware, Broadcom and the broader ecosystem. Let's first look at the key deal points, it's been well covered in the press. But just for the record, $61 billion in a 50/50 cash and stock deal, resulting in a blended price of $138 per share, which is a 44% premium to the unaffected price, i.e. prior to the news breaking. Broadcom will assume 8 billion of VMware debt and promises that the acquisition will be immediately accretive and will generate 8.5 billion in EBITDA by year three. That's more than 4 billion in EBITDA relative to VMware's current performance today. In a classic Broadcom M&A approach, the company promises to dilever debt and maintain investment grade ratings. They will rebrand their software business as VMware, which will now comprise about 50% of revenues. There's a 40 day go shop and importantly, Broadcom promises to continue to return 60% of its free cash flow to shareholders in the form of dividends and buybacks. Okay, with that out of the way, we're going to get to the money slide literally in a moment that Broadcom shared on its investor call. Broadcom has more than 20 business units. It's CEO Hock Tan makes it really easy for his business unit managers to understand. Rule number one, you agreed to an operating plan with targets for revenue, growth, EBITDA, et cetera, hit your numbers consistently and we're good. You'll be very well compensated and life will be wonderful for you and your family. Miss the number, and we're going to have a frank and uncomfortable bottom line discussion. You'll four, perhaps five quarters to turn your business around, if you don't, we'll kill it or sell it if we can. Rule number two, refer to rule number one. Hello, VMware, here's the money slide. I'll interpret the bullet points on the left for clarity. Your fiscal year 2022 EBITDA was 4.7 billion. By year three, it will be 8.5 billion. And we Broadcom have four knobs to turn with you, VMware to help you get there. First knob, if it ain't recurring revenue with rubber stamp renewals, we're going to convert that revenue or kill it. Knob number two, we're going to focus R&D in the most profitable areas of the business. AKA expect the R&D budget to be cut. Number three, we're going to spend less on sales and marketing by focusing on existing customers. We're not going to lose money today and try to make it up many years down the road. And number four, we run Broadcom with 1% GNA. You will too. Any questions? Good. Now, just to give you a little sense of how Broadcom runs its business and how well run a company it is, let's do a little simple comparison with this financial snapshot. All we're doing here is taking the most recent quarterly earnings reports from Broadcom and VMware respectively. We take the quarterly revenue and multiply by four X to get the revenue run rate and then we calculate the ratios off of the most recent quarters revenue. It's worth spending some time on this to get a sense of how profitable the Broadcom business actually is and what the spreadsheet gurus at Broadcom are seeing with respect to the possibilities for VMware. So combined, we're talking about a 40 plus billion dollar company. Broadcom is growing at more than 20% per year. Whereas VMware's latest quarter showed a very disappointing 3% growth. Broadcom is mostly a hardware company, but its gross margin is in the high seventies. As a software company of course VMware has higher gross margins, but FYI, Broadcom's software business, the remains of Symantec and what they purchased as CA has 90% gross margin. But the I popper is operating margin. This is all non gap. So it excludes things like stock based compensation, but Broadcom had 61% operating margin last quarter. This is insanely off the charts compared to VMware's 25%. Oracle's non gap operating margin is 47% and Oracle is an incredibly profitable company. Now the red box is where the cuts are going to take place. Broadcom doesn't spend much on marketing. It doesn't have to. It's SG&A is 3% of revenue versus 18% for VMware and R&D spend is almost certainly going to get cut. The other eye popper is free cash flow as a percentage of revenue at 51% for Broadcom and 29% for VMware. 51%. That's incredible. And that my dear friends is why Broadcom a company with just under 30 billion in revenue has a market cap of 230 billion. Let's dig into the VMware portfolio a bit more and identify the possible areas that will be placed under the microscope by Hock Tan and his managers. The data from ETR's latest survey shows the net score or spending momentum across VMware's portfolio in this chart, net score essentially measures the net percent of customers that are spending more on a specific product or vendor. The yellow bar is the most recent survey and compares the April 22 survey data to April 21 and January of 22. Everything is down in the yellow from January, not surprising given the economic outlook and the change in spending patterns that we've reported. VMware Cloud on AWS remains the product in the ETR survey with the most momentum. It's the only offering in the portfolio with spending momentum above the 40% line, a level that we consider highly elevated. Unified Endpoint Management looks more than respectable, but that business is a rock fight with Microsoft. VMware Cloud is things like VMware Cloud foundation, VCF and VMware's cross cloud offerings. NSX came from the Nicira acquisition. Tanzu is not yet pervasive and one wonders if VMware is making any money there. Server is ESX and vSphere and is the bread and butter. That is where Broadcom is going to focus. It's going to look at VSAN and NSX, which is software probably profitable. And of course the other products and see if the investments are paying off, if they are Broadcom will keep, if they are not, you can bet your socks, they will be sold off or killed. Carbon Black is at the far right. VMware paid $2.1 billion for Carbon Black. And it's the lowest performer on this list in terms of net score or spending momentum. And that doesn't mean it's not profitable. It just doesn't have the momentum you'd like to see, so you can bet that is going to get scrutiny. Remember VMware's growth has been under pressure for the last several years. So it's been buying companies, dozens of them. It bought AirWatch, bought Heptio, Carbon Black, Nicira, SaltStack, Datrium, Versedo, Bitnami, and on and on and on. Many of these were to pick up engineering teams. Some of them were to drive new revenue. Now this is definitely going to be scrutinized by Broadcom. So that helps explain why Michael Dell would sell VMware. And where does VMware go from here? It's got great core product. It's an iconic name. It's got an awesome ecosystem, fantastic distribution channel, but its growth is slowing. It's got limited developer chops in a world that developers and cloud native is all the rage. It's got a far flung R&D agenda going at war with a lot of different places. And it's increasingly fighting this multi front war with cloud companies, companies like Cisco, IBM Red Hat, et cetera. VMware's kind of becoming a heavy lift. It's a perfect acquisition target for Broadcom and why the street loves this deal. And we titled this Breaking Analysis taming the VMware beast because VMware is a beast. It's ubiquitous. It's an epic software platform. EMC couldn't control it. Dell used it as a piggy bank, but really didn't change its operating model. Broadcom 100% will. Now one of the things that we get excited about is the future of systems architectures. We published a breaking analysis about a year ago, talking about AWS's secret weapon with Nitro and it's Annapurna custom Silicon efforts. Remember it acquired Annapurna for a measly $350 million. And we talked about how there's a new architecture and a new price performance curve emerging in the enterprise, driven by AWS and being followed by Microsoft, Google, Alibaba, a trend toward custom Silicon with the arm based Nitro and which is AWS's hypervisor and Nick strategy, enabling processor diversity with things like Graviton and Trainium and other diverse processors, really diversifying away from x86 and how this leads to much faster product cycles, faster tape out, lower costs. And our premise was that everyone in the data center is going to competes, is going to need a Nitro to be competitive long term. And customers are going to gravitate toward the most economically favorable platform. And as we describe the landscape with this chart, we've updated this for this Breaking Analysis and we'll come back to nitro in a moment. This is a two dimensional graphic with net score or spending momentum on the vertical axis and overlap formally known as market share or presence within the survey, pervasiveness that's on the horizontal axis. And we plot various companies and products and we've inserted VMware's net score breakdown. The granularity in those colored bars on the bottom right. Net score is essentially the green minus the red and a couple points on that. VMware in the latest survey has 6% new adoption. That's that lime green. It's interesting. The question Broadcom is going to ask is, how much does it cost you to acquire that 6% new. 32% of VMware customers in the survey are increasing spending, meaning they're increasing spending by 6% or more. That's the forest green. And the question Broadcom will dig into is what percent of that increased spend (chuckles) you're capturing is profitable spend? Whatever isn't profitable is going to be cut. Now that 52% gray area flat spending that is ripe for the Broadcom picking, that is the fat middle, and those customers are locked and loaded for future rent extraction via perpetual renewals and price increases. Only 8% of customers are spending less, that's the pinkish color and only 3% are defecting, that's the bright red. So very, very sticky profile. Perfect for Broadcom. Now the rest of the chart lays out some of the other competitor names and we've plotted many of the VMware products so you can see where they fit. They're all pretty respectable on the vertical axis, that's spending momentum. But what Broadcom wants is that core ESX vSphere base where we've superimposed the Broadcom logo. Broadcom doesn't care so much about spending momentum. It cares about profitability potential and then momentum. AWS and Azure, they're setting the pace in this business, in the upper right corner. Cisco very huge presence in the data center, as does Intel, they're not in the ETR survey, but we've superimposed them. Now, Intel of course, is in a dog fight within Nvidia, the Arm ecosystem, AMD, don't forget China. You see a Google cloud platform is in there. Oracle is also on the chart as well, somewhat lower on the vertical axis, but it doesn't have that spending momentum, but it has a big presence. And it owns a cloud as we've talked about many times and it's highly differentiated. It's got a strategy that allows it to differentiate from the pack. It's very financially driven. It knows how to extract lifetime value. Safra Catz operates in many ways, similar to what we're seeing from Hock Tan and company, different from a portfolio standpoint. Oracle's got the full stack, et cetera. So it's a different strategy. But very, very financially savvy. You could see IBM and IBM Red Hat in the mix and then Dell and HP. I want to come back to that momentarily to talk about where value is flowing. And then we plotted Nutanix, which with Acropolis could suck up some V tax avoidance business. Now notice Symantec and CA, relatively speaking in the ETR survey, they have horrible spending momentum. As we said, Broadcom doesn't care. Hock Tan is not going for growth at the expense of profitability. So we fully expect VMware to come down on the vertical axis over time and go up on the profit scale. Of course, ETR doesn't measure the profitability here. Now back to Nitro, VMware has this thing called Project Monterey. It's essentially their version of Nitro and will serve as their future architecture diversifying off x86 and accommodating alternative processors. And a much more efficient performance, price in energy consumption curve. Now, one of the things that we've advocated for, we said this about Dell and others, including VMware to take a page out of AWS and start developing custom Silicon to better integrate hardware and software and accelerate multi-cloud or what we call supercloud. That layer above the cloud, not just running on individual clouds. So this is all about efficiency and simplicity to own this space. And we've challenged organizations to do that because otherwise we feel like the cloud guys are just going to have consistently better costs, not necessarily price, but better cost structures, but it begs the question. What happens to Project Monterey? Hock Tan and Broadcom, they don't invest in something that is unproven and doesn't throw off free cash flow. If it's not going to pay off for years to come, they're probably not going to invest in it. And yet Project Monterey could help secure VMware's future in not only the data center, but at the edge and compete more effectively with cloud economics. So we think either Project Monterey is toast or the VMware team will knock on the door of one of Broadcom's 20 plus business units and say, guys, what if we work together with you to develop a version of Monterey that we can use and sell to everyone, it'd be the arms dealer to everyone and be competitive with the cloud and other players out there and create the de facto standard for data center performance and supercloud. I mean, it's not outrageously expensive to develop custom Silicon. Tesla is doing it for example. And Broadcom obviously is capable of doing it. It's got good relationships with semiconductor fabs. But I think this is going to be a tough sell to Broadcom, unless VMware can hide this in plain site and make it profitable fast, like AWS most likely has with Nitro and Graviton. Then Project Monterey and our pipe dream of alternatives to Nitro in the data center could happen but if it can't, it's going to be toast. Or maybe Intel or Nvidia will take it over or maybe the Monterey team will spin out a VMware and do a Pensando like deal and demonstrate the viability of this concept and then Broadcom will buy it back in 10 years. Here's a double click on that previous data that we put in tabular form. It's how the data on that previous slide was plotted. I just want to give you the background data here. So net score spending momentum is the sorted on the left. So it's sorted by net score in the left hand chart, that was the y-axis in the previous data set and then shared and or presence in the data set is the right hand chart. In other words, it's sorted on the right hand chart, right hand table. That right most column is shared and you can see it's sorted top to bottom, and that was the x-axis on the previous chart. The point is not many on the left hand side are above the 40% line. VMware Cloud on AWS is, it's expensive, so it's probably profitable and it's probably a keeper. We'll see about the rest of VMware's portfolio. Like what happens to Tanzu for example. On the right, we drew a red line, just arbitrarily at those companies and products with more than a hundred mentions in the survey, everything but Tanzu from VMware makes that cut. Again, this is no indication of profitability here, and that's what's going to matter to Broadcom. Now let's take a moment to address the question of Broadcom as a software company. What the heck do they know about software, right. Well, they're not dumb over there and they know how to run a business, but there is a strategic rationale to this move beyond just doing portfolios and extracting rents and cutting R&D, et cetera, et cetera. Why, for example, isn't Broadcom going after coming back to Dell or HPE, it could pick up for a lot less than VMware, and they got way more revenue than VMware. Well, it's obvious, software's more profitable of course, and Broadcom wants to move up the stack, but there's a trend going on, which Broadcom is very much in touch with. First, it sells to Dell and HPE and Cisco and all the OEM. so it's not going to disrupt that. But this chart shows that the value is flowing away from traditional servers and storage and networking to two places, merchant Silicon, which itself is morphing. Broadcom... We focus on the left hand side of this chart. Broadcom correctly believes that the world is shifting from a CPU centric center of gravity to a connectivity centric world. We've talked about this on theCUBE a lot. You should listen to Broadcom COO Charlie Kawwas speak about this. It's all that supporting infrastructure around the CPU where value is flowing, including of course, alternative GPUs and XPUs, and NPUs et cetera, that are sucking the value out of the traditional x86 architecture, offloading some of the security and networking and storage functions that traditionally have been done in x86 which are part of the waste right now in the data center. This is that shifting dynamic of Moore's law. Moore's law, not keeping pace. It's slowing down. It's slower relative to some of the combinatorial factors. When you add up in all the CPU and GPU and NPU and accelerators, et cetera. So we've talked about this a lot in Breaking Analysis episodes. So the value is shifting left within that middle circle. And it's shifting left within that left circle toward components, other than CPU, many of which Broadcom supplies. And then you go back to the middle, value is shifting from that middle section, that traditional data center up into hyperscale clouds, and then to the right toward infrastructure software to manage all that equipment in the data center and across clouds. And look Broadcom is an arms dealer. They simply sell to everyone, locking up key vectors of the value chain, cutting costs and raising prices. It's a pretty straightforward strategy, but not for the fate of heart. And Broadcom has become pretty good at it. Let's close with the customer feedback. I spoke with ETRs Eric Bradley this morning. He and I both reached out to VMware customers that we know and got their input. And here's a little snapshot of what they said. I'll just read this. Broadcom will be looking to invest in the core and divest of any underperforming assets, right on. It's just what we were saying. This doesn't bode well for future innovation, this is a CTO at a large travel company. Next comment, we're a Carbon Black customer. VMware didn't seem to interfere with Carbon Black, but now that we're concerned about short term disruption to their tech roadmap and long term, are they going to split and be sold off like Symantec was, this is a CISO at a large hospitality organization. Third comment, I got directly from a VMware practitioner, an IT director at a manufacturing firm. This individual said, moving off VMware would be very difficult for us. We have over 500 applications running on VMware, and it's really easy to manage. We're not going to move those into the cloud and we're worried Broadcom will raise prices and just extract rents. Last comment, we'll share as, Broadcom sees the cloud data center and IoT is their next revenue source. The VMware acquisition provides them immediate virtualization capabilities to support a lightweight IoT offering. Big concern for customers is what technology they will invest in and innovate, and which will be stripped off and sold. Interesting. I asked David Floyer to give me a back of napkin estimate for the following question. I said, David, if you're running mission critical applications on VMware, how much would it increase your operating cost moving those applications into the cloud? Or how much would it save? And he said, Dave, VMware's really easy to run. It can run any application pretty much anywhere, and you don't need an army of people to manage it. All your processes are tied to VMware, you're locked and loaded. Move that into the cloud and your operating cost would double by his estimates. Well, there you have it. Broadcom will pinpoint the optimal profit maximization strategy and raise prices to the point where customers say, you know what, we're still better off staying with VMware. And sadly, for many practitioners there aren't a lot of choices. You could move to the cloud and increase your cost for a lot of your applications. You could do it yourself with say Zen or OpenStack. Good luck with that. You could tap Nutanix. That will definitely work for some applications, but are you going to move your entire estate, your application portfolio to Nutanix? It's not likely. So you're going to pay more for VMware and that's the price you're going to pay for two decades of better IT. So our advice is get out ahead of this, do an application portfolio assessment. If you can move apps to the cloud for less, and you haven't yet, do it, start immediately. Definitely give Nutanix a call, but going to have to be selective as to what you actually can move, forget porting to OpenStack, or do it yourself Hypervisor, don't even go there. And start building new cloud native apps where it makes sense and let the VMware stuff go into manage decline. Let certain apps just die through attrition, shift your development resources to innovation in the cloud and build a brick wall around the stable apps with VMware. As Paul Maritz, the former CEO of VMware said, "We are building the software mainframe". Now marketing guys got a hold of that and said, Paul, stop saying that, but it's true. And with Broadcom's help that day we'll soon be here. That's it for today. Thanks to Stephanie Chan who helps research our topics for Breaking Analysis. Alex Myerson does the production and he also manages the Breaking Analysis podcast. Kristen Martin and Cheryl Knight help get the word out on social and thanks to Rob Hof, who was our editor in chief at siliconangle.com. Remember, these episodes are all available as podcast, wherever you listen, just search Breaking Analysis podcast. Check out ETRs website at etr.ai for all the survey action. We publish a full report every week on wikibon.com and siliconangle.com. You can email me directly at david.vellante@siliconangle.com. You can DM me at DVellante or comment on our LinkedIn posts. This is Dave Vellante for theCUBE Insights powered by ETR. Have a great week, stay safe, be well. And we'll see you next time. (upbeat music)

from the cube studios in palo alto in boston bringing you data-driven insights from the cube and etr this is breaking analysis with dave vellante nvidia wants to completely transform enterprise computing by making data centers run 10x faster at one tenth the cost and video's ceo jensen wang is crafting a strategy to re-architect today's on-prem data centers public clouds and edge computing installations with a vision that leverages the company's strong position in ai architectures the keys to this end-to-end strategy include a clarity of vision massive chip design skills a new arm-based architecture approach that integrates memory processors i o and networking and a compelling software consumption model even if nvidia is unsuccessful at acquiring arm we believe it will still be able to execute on this strategy by actively participating in the arm ecosystem however if its attempts to acquire arm are successful we believe it will transform nvidia from the world's most valuable chip company into the world's most valuable supplier of integrated computing architectures hello everyone and welcome to this week's wikibon cube insights powered by etr in this breaking analysis we'll explain why we believe nvidia is in the right position to power the world's computing centers and how it plans to disrupt the grip that x86 architectures have had on the data center for decades the data center market is in transition like the universe the cloud is expanding at an accelerated pace no longer is the cloud an opaque set of remote services i always say somewhere out there sitting in a mega data center no rather the cloud is extending to on-premises data centers data centers are moving into the cloud and they're connecting through adjacent locations that create hybrid interactions clouds are being meshed together across regions and eventually will stretch to the far edge this new definition or view of cloud will be hyper distributed and run by software kubernetes is changing the world of software development and enabling workloads to run anywhere open apis external applications expanding the digital supply chains and this expanding cloud they all increase the threat surface and vulnerability to the most sensitive information that resides within the data center and around the world zero trust has become a mandate we're also seeing ai being injected into every application and it's the technology area that we see with the most momentum coming out of the pandemic this new world will not be powered by general purpose x86 processors rather it will be supported by an ecosystem of arm-based providers in our opinion that are affecting an unprecedented increase in processor performance as we have been reporting and nvidia in our view is sitting in the poll position and is currently the favorite to dominate the next era of computing architecture for global data centers public clouds as well as the near and far edge let's talk about jensen wang's clarity of vision for this new world here's a chart that underscores some of the fundamental assumptions that he's leveraging to expand his market the first is that there's a lot of waste in the data center he claims that only half of the cpu cores deployed in the data center today actually support applications the other half are processing the infrastructure all around the applications that run the software defined data center and they're terribly under utilized nvidia's blue field three dpu the data processing unit was described in a blog post on siliconangle by analyst zias caravala as a complete mini server on a card i like that with software defined networking storage and security acceleration built in this product has the bandwidth and according to nvidia can replace 300 general purpose x86 cores jensen believes that every network chip will be intelligent programmable and capable of this type of acceleration to offload conventional cpus he believes that every server node will have this capability and enable every packed of every packet and every application to be monitored in real time all the time for intrusion and as servers move to the edge bluefield will be included as a core component in his view and this last statement by jensen is critical in our opinion he says ai is the most powerful force of our time whether you agree with that or not it's relevant because ai is everywhere an invidious position in ai and the architectures the company is building are the fundamental linchpin of its data center enterprise strategy so let's take a look at some etr spending data to see where ai fits on the priority list here's a set of data in a view that we often like to share the horizontal axis is market share or pervasiveness in the etr data but we want to call your attention to the vertical axis that's really really what really we want to pay attention today that's net score or spending momentum exiting the pandemic we've seen ai capture the number one position in the last two surveys and we think this dynamic will continue for quite some time as ai becomes the staple of digital transformations and automations an ai will be infused in every single dot you see on this chart nvidia's architectures it just so happens are tailor made for ai workloads and that is how it will enter these markets let's quantify what that means and lay out our view of how nvidia with the help of arm will go after the enterprise market here's some data from wikibon research that depicts the percent of worldwide spending on server infrastructure by workload type here are the key points first the market last year was around 78 billion dollars worldwide and is expected to approach 115 billion by the end of the decade this might even be a conservative figure and we've split the market into three broad workload categories the blue is ai and other related applications what david floyer calls matrix workloads the orange is general purpose think things like erp supply chain hcm collaboration basically oracle saps and microsoft work that's being supported today and of course many other software providers and the gray that's the area that jensen was referring to is about being wasted the offload work for networking and storage and all the software defined management in the data centers around the world okay you can see the squeeze that we think compute infrastructure is gonna gonna occur around that orange area that general-purpose workloads that we think is going to really get squeezed in the next several years on a percentage basis and on an absolute basis it's really not growing nearly as fast as the other two and video with arm in our view is well positioned to attack that blue area and the gray area those those workload offsets and the new emerging ai applications but even the orange as we've reported is under pressure as for example companies like aws and oracle they use arm-based designs to service general purpose workloads why are they doing that cost is the reason because x86 generally and intel specifically are not delivering the price performance and efficiency required to keep up with the demands to reduce data center costs and if intel doesn't respond which we believe it will but if it doesn't act arm we think will get 50 percent of the general purpose workloads by the end of the decade and with nvidia it will dominate the blue the ai and the gray the offload work when we say dominate we're talking like capture 90 percent of the available market if intel doesn't respond now intel they're not just going to sit back and let that happen pat gelsinger is well aware of this in moving intel to a new strategy but nvidia and arm are way ahead in the game in our view and as we've reported this is going to be a real challenge for intel to catch up now let's take a quick look at what nvidia is doing with relevant parts of its pretty massive portfolio here's a slide that shows nvidia's three chip strategy the company is shifting to arm-based architectures which we'll describe in more detail in a moment the slide shows at the top line nvidia's ampere architecture not to be confused with the company ampere computing nvidia is taking a gpu centric approach no surprise obvious reasons there that's their sort of stronghold but we think over time it may rethink this a little bit and lean more into npus the neural processing unit we look at what apple's doing what tesla are doing we see opportunities for companies like nvidia to really sort of go after that but we'll save that for another day nvidia has announced its grace cpu a nod to the famous computer scientist grace hopper grace is a new architecture that doesn't rely on x86 and much more efficiently uses memory resources we'll again describe this in more detail later and the bottom line there that roadmap line shows the bluefield dpu which we described is essentially a complete server on a card in this approach using arm will reduce the elapsed time to go from chip design to production by 50 we're talking about shaving years down to 18 months or less we don't have time to do a deep dive into nvidia's portfolio it's large but we want to share some things that we think are important and this next graphic is one of them this shows some of the details of nvidia's jetson architecture which is designed to accelerate those ai plus workloads that we showed earlier and the reason is that this is important in our view is because the same software supports from small to very large including edge systems and we think this type of architecture is very well suited for ai inference at the edge as well as core data center applications that use ai and as we've said before a lot of the action in ai is going to happen at the edge so this is a good example of leveraging an architecture across a wide spectrum of performance and cost now we want to take a moment to explain why the moved arm-based architectures is so critical to nvidia one of the biggest cost challenges for nvidia today is keeping the gpu utilized typical utilization of gpu is well below 20 percent here's why the left hand side of this chart shows essentially racks if you will of traditional compute and the bottlenecks that nvidia faces the processor and dram they're tied together in separate blocks imagine there are thousands thousands of cores in a rack and every time you need data that lives in another processor you have to send a request and go retrieve it it's very overhead intensive now technologies like rocky are designed to help but it doesn't solve the fundamental architectural bottleneck every gpu shown here also has its own dram and it has to communicate with the processors to get the data i.e they can't communicate with each other efficiently now the right hand side side shows where nvidia is headed start in the middle with system on chip socs cpus are packaged in with npus ipu's that's the image processing unit you know x dot dot dot x pu's the the alternative processors they're all connected with sram which is think of that as a high speed layer like an layer one cache the os for the system on a chip lives inside of this and that's where nvidia has this killer software model what they're doing is they're licensing the consumption of the operating system that's running this system on chip in this entire system and they're affecting a new and really compelling subscription model you know maybe they should just give away the chips and charge for the software like a razer blade model talk about disruptive now the outer layer is the the dpu and the shared dram and other resources like the ampere computing the company this time cpus ssds and other resources these are the processors that will manage the socs together this design is based on nvidia's three chip approach using bluefield dpu leveraging melanox that's the networking component the network enables shared dram across the cpus which will eventually be all arm based grace lives inside the system on a chip and also on the outside layers and of course the gpu lives inside the soc in a scaled-down version like for instance a rendering gpu and we show some gpus on the outer layer as well for ai workloads at least in the near term you know eventually we think they may reside solely in the system on chip but only time will tell okay so you as you can see nvidia is making some serious moves and by teaming up with arm and leaning into the arm ecosystem it plans to take the company to its next level so let's talk about how we think competition for the next era of compute stacks up here's that same xy graph that we love to show market share or pervasiveness on the horizontal tracking against next net score on the vertical net score again is spending velocity and we've cut the etr data to capture players that are that are big in compute and storage and networking we've plugged in a couple of the cloud players these are the guys that we feel are vying for data center leadership around compute aws is a very strong position we believe that more than half of its revenues comes from compute you know ec2 we're talking about more than 25 billion on a run rate basis that's huge the company designs its own silicon graviton 2 etc and is working with isvs to run general purpose workloads on arm-based graviton chips microsoft and google they're going to follow suit they're big consumers of compute they sell a lot but microsoft in particular you know they're likely to continue to work with oem partners to attack that on-prem data center opportunity but it's really intel that's the provider of compute to the likes of hpe and dell and cisco and the odms which are the odms are not shown here now hpe let's talk about them for a second they have architectures and i hate to bring it up but remember the machine i know it's the butt of many jokes especially from competitors it had been you know frankly hpe and hp they deserve some of that heat for all the fanfare and then that they they put out there and then quietly you know pulled the machine or put it out the pasture but hpe has a strong position in high performance computing and the work that it did on new computing architectures with the machine and shared memories that might be still kicking around somewhere inside of hp and could come in handy for some day in the future so hpe has some chops there plus hpe has been known hp historically has been known to design its own custom silicon so i would not count them out as an innovator in this race cisco is interesting because it not only has custom silicon designs but its entry into the compute business with ucs a decade ago was notable and they created a new way to think about integrating resources particularly compute and networking with partnerships to add in the storage piece initially it was within within emc prior to the dell acquisition but you know it continues with netapp and pure and others cisco invests they spend money investing in architectures and we expect the next generation of ucs oh ucs2 ucs 2.0 will mark another notable milestone in the company's data center business dell just had an amazing quarterly earnings report the company grew top line revenue by around 12 percent and it wasn't because of an easy compare to last year dells is simply executing despite continued softness in the legacy emc storage business laptop the laptop demand continued to soar in dell server business it's growing again but we don't see dell as an architectural innovator per se in compute rather we think the company will be content to partner with suppliers whether it's intel nvidia arm-based partners or all of the above dell we think will rely on its massive portfolio its excellent supply chain and execution ethos to compete now ibm is notable for historical reasons with its mainframe ibm created the first great compute monopoly before it unwind and wittingly handed it to intel along with microsoft we don't see ibm necessarily aspiring to retake that compute platform mantle that once once held with mainframes rather red hat in the march to hybrid cloud is the path that we think in our view is ibm's approach now let's get down to the elephants in the room intel nvidia and china inc china is of course relevant because of companies like alibaba and huawei and the chinese chinese government's desire to be self-sufficient in semiconductor technology and technology generally but our premise here is that the trends are favoring nvidia over intel in this picture because nvidia is making moves to further position itself for new workloads in the data center and compete for intel's stronghold intel is going to attempt to remake itself but it should have been doing this seven years ago what pat gelsinger is doing today intel is simply far behind and it's going to take at least a couple years for them to really start to to make inroads in this new model let's stay on the nvidia v intel comparison for a moment and take a snapshot of the two companies here's a quick chart that we put together with some basic kpis some of these figures are approximations or they're rounded so don't stress over it too much but you can see intel is an 80 billion dollar company 4x the size of nvidia but nvidia's market cap far exceeds that of intel why is that of course growth in our view it's justified due to that growth and nvidia's strategic positioning intel used to be the gross margin king but nvidia has much higher gross margins interesting now when it comes down to free cash flow intel is still dominant as it pertains to the balance sheet intel is way more capital intensive than nvidia and as it starts to build out its foundries that's going to eat into intel's cash position now what we did is we put together a little pro forma on the third column of nvidia plus arm circa let's say the end of 2022. we think they could get to a run rate that is about half the size of intel and that can propel the company's market cap to well over half a trillion dollars if they get any credit for arm they're paying 40 billion dollars for arm a company that's you know sub 2 billion the risk is that because of the arm because the arm deal is based on cash plus tons of stock it could put pressure on the market capitalization for some time arm has 90 percent gross margins because it pretty much has a pure license model so it helps the gross margin line a little bit for this in this pro forma and the balance sheet is a swag arm has said that it's not going to take on debt to do the transaction but we haven't had time to really dig into that and figure out how they're going to structure it so we took a took a swag in in what we would do with this low interest rate environment but but take that with a grain of salt we'll do more research in there the point is given the momentum and growth of nvidia its strategic position in ai is in its deep engineering they're aimed at all the right places and its potential to unlock huge value with arm on paper it looks like the horse to beat if it can execute all right let's wrap up here's a summary look the architectures on which nvidia is building its dominant ai business are evolving and nvidia is well positioned to drive a truck right to the enterprise in our view the power has shifted from intel to the arm ecosystem and nvidia is leaning in big time whereas intel it has to preserve its current business while recreating itself at the same time this is going to take a couple of years but intel potentially has the powerful backing of the us government too strategic to fail the wild card is will nvidia be successful in acquiring arm certain factions in the uk and eu are fighting the deal because they don't want the u.s dictating to whom arm can sell its technology for example the restrictions placed on huawei for many suppliers of arm-based chips based on u.s sanctions nvidia's competitors like broadcom qualcomm at all are nervous that if nvidia gets armed they will be at a competitive disadvantage they being invidious competitors and for sure china doesn't want nvidia controlling arm for obvious reasons and it will do what it can to block the deal and or put handcuffs on how business can be done in china we can see a scenario where the u.s government pressures the uk and eu regulators to let this deal go through look ai and semiconductors you can't get much more strategic than that for the u.s military and the u.s long-term competitiveness in exchange for maybe facilitating the deal the government pressures nvidia to guarantee some feed to the intel foundry business while at the same time imposing conditions that secure access to arm-based technology for nvidia's competitors and maybe as we've talked about before having them funnel business to intel's foundry actually we've talked about the us government enticing apple to do so but it could also entice nvidia's competitors to do so propping up intel's foundry business which is clearly starting from ground zero and is going to need help outside of intel's own semiconductor manufacturing internally look we don't have any inside information as to what's happening behind the scenes with the us government and so forth but on its earning call on its earnings call nvidia said they're working with regulators that are on track to complete the deal in early 2022. we'll see okay that's it for today thank you to david floyer who co-created this episode with me and remember i publish each week on wikibon.com and siliconangle.com these episodes they're all available as podcasts all you're going to do is search breaking analysis podcast and you can always connect with me on twitter at dvalante or email me at david.valante siliconangle.com i always appreciate the comments on linkedin and in the clubhouse please follow me so you can be notified when we start a room and riff on these topics and don't forget to check out etr.plus for all the survey data this is dave vellante for the cube insights powered by etr be well and we'll see you next time [Music] you

>> From theCUBE studios in Palo Alto, in Boston bringing you data-driven insights from theCUBE and ETR. This is breaking analysis with Dave Vellante. >> SaaS companies have been some of the strongest performers in this COVID era. They finally took a bit of a breather this month, but they remain generally well-positioned for the next several years with their predictable models and cloud platforms. Meanwhile, the demise of on-prem legacy players from COVID shock, seems to have been overstated, in part because of the return of the laptop and in the case of Oracle with some see as a cloud play, Hmm. Then there's Bitcoin which is seeing public companies use their balance sheet liquidity to invest in the cryptocurrency. (chuckles) Wow. What does that all mean? I'll leave that for another day. Hello everyone and welcome to this week on Cube insights powered by ETR. On this breaking analysis, we'll pick out some of the more recent themes from this month and share our thoughts in some major enterprise software players, the future of on-prem, a review of our take on cloud and what cloud will look like in the 2020s. Wow. It's true, trees really don't grow to the moon. As predicted, the stock market has been a little bit crazy this month. February saw some leading SaaS names like Workday, Salesforce, and ServiceNow take a bit of a breather in the second half of the month. Workday and Salesforce announced earnings on the 25th. Workday had its first billion dollar subscription revenue quarter at 16% revenue growth a revenue and earnings beat. And of course the stock closed down Friday, more than 2%. Salesforce had a nearly $6 billion revenue quarter 20% growth, a revenue and earnings beat. And the day after it announced earnings the stock was down more than 6%. The market is worried about rising interest rates, and maybe concerned that an inflation fears are going to kill the stimulus bill. And so any whiff of caution by company managements is met with dampened enthusiasm. Meanwhile, it's looking like some of the big on-prem legacy firms, notably Dell, HPQ and HPE are making it through COVID, and might even come out in the other side stronger maybe. Dell handily beat expectations on the 25th on the strength of 17% growth in its client business. That's PCs. It's the gift that keeps on giving. HPQ had a strong beat as well, and we're anticipating a solid quarter from HPE next week on March 2nd. And then there's Oracle. Barron's had a big article on February 19th, entitled, "Oracle is turning into a cloud giant and why it's stock is a buy". It moved the market. And many investors rotated out of growth stocks, tech growth tech stocks into Oracle, others who had owned Oracle for a while scooped up some profits. Is Oracle a cloud giant? Hmm. We'll discuss that in a moment. And then there's all this Bitcoin mania. You know, our interest there is much more beyond the price fluctuations rather we're interested in the innovations in crypto. Look, we're going to table this for another day, but it's an interesting side note of this February madness. Let's take a look closer look at the February chill for SaaS companies. Here's a chart showing the relative performance of some of the big SaaS names in the latter half of this month. Now despite the strong earnings for Workday and Salesforce you can see the market's negative response on the 26th. Snowflake and ServiceNow they had epic runs last year, and they've been softening although on Friday morning ServiceNow shut down quickly on the open on sympathy with Workday and ServiceNow and then investors, you know, came back in. Very weird action in the market these days, again, not surprising. And look at the reaction investors had to the Barron's article on the 19th. They anointed Oracle as a cloud giant. Kudos to the Oracle PR team for that one. Now, let's take a look at these companies and put them in context. Even though they're not direct competitors it's instructive to model some of the top enterprise software players in positions, and line them up against each other. This chart here shows two dimensions from the ETR data. On the vertical axis is net score or customer spending momentum. And the horizontal axis is market share or pervasiveness in the survey. The table inset shows the net score measurement in the shared end. That's the metric that plots the dots. In both cases bigger is better. Note, that red dotted-line there is the 40% line. 40% to us is the magic number. Anything above that line is considered elevated. So we have ServiceNow and Salesforce they're up to the right. They're both big companies. They have significant market presence amongst the CIO and both have elevated spending velocity in the 50% range. And I've said for years, these two companies are on a collision course and I stand by that. It started happening and McDermott Bill McDermott, new CEO he's going to accelerate that in our view. We put a cloud around Snowflake tongue in cheek, because they are literally in the clouds on this chart. They stand alone, with a solid market presence that continues to grow in an off the charts net score of 83.3% now. For context you can see Oracle Fusion, NetSuite and Taleo. In addition, we put Slack and Coupa on the graphic, two names that have been on the radar lately and SAP, which continues to show decent spending momentum despite its challenges. All right, let me make a few comments on some of these companies. Snowflake, we've talked about a lot. I said earlier that their IPO, that if you really wanted to own it and couldn't wait for a better price, which I thought you'd get. And by the way you did, but then if you really wanted to own it on day one hold your nose and buy it and then wait a few years. So, you know, good luck. And I think you'll, it'll turn out okay for you. Now, the data really continues to show strong demand for Snowflake. There's no signs of them slowing down. So they announced earnings on March 3rd. We didn't have more data there. So we would expect confirmation of our analysis but you never know. Now Workday, here's our take. In our view the market is catching up to Workday. They had about a three-year lead at least in human capital management and the cloud and that whole model. And they had the best product. It was really simple and it was quite disruptive. But now you got Oracle, ADP, Ceridian they're catching up. Workday's expansion into financial management has been much more challenging and as it gets bigger, things get tougher. It's still though an enduring name. Salesforce, we see a bit differently. Salesforce is so big now, it's really hard for it to move the needle. And so it's been on an acquisition binge, and to grow that's likely going to continue. It could work well for the company. I mean, similar to the ways in which Oracle consolidated software names and picked up a lot of customers. Salesforce is a great name, and we think is going to continue to grow. ServiceNow is interesting. It's entering a new chapter under CEO, Bill McDermott, new CEO. He wants to double the company's revenue. And I think he's got a reasonable chance at that through a combination of great go-to-market and expanding the platform and in McDermott style doing acquisitions. SAP's market value tripled under his watch, and he knows the customers. And he's a magnet for attracting talent. Now ServiceNow is not without its challenges. Its customers often complain that ServiceNow is pricing is really high and it's becoming the Oracle of service management. But as McDermott aims more at SAP and Oracle customers, they create a nice umbrella for ServiceNow to work with. And technically, we think ServiceNow has other challenges around its multi-instance. We call it, if you can't fix it feature it architecture. That may present some issues down the road at scale. We don't have time to go into that in detail but suffice it to say that ServiceNow runs on its own cloud. So it's not running on a hyper scale cloud. Yeah. Good news it doesn't have to pay it through that. The bad news is, has got to manage all that infrastructure. It's basically be a cloud supply supplier but it doesn't do multi-tenant which means fundamentally, it has a more expensive cost structure. Okay. Let's turn our attention to what's happening on-prem with some of the big legacy names. Here's the same X Y chart with some of the big names that have a presence on-prem. First you can see VMware and Cisco, Oracle, Dell, IBM and HP. Look at them on the horizontal scale. They've got a large market share of presence in the ETR dataset. Unlike the larger SaaS companies however, none is above that magic 40% net scoreline. Pure, Dell's laptop business, Red Hat, OpenShift. They're above the line with Nutanix just about there at the line. The other major laptop players, Lenovo and HPQ showing momentum from the whole remote work trend. And for context, we put in NetApp so you can get a sense of where they're at. Pure beat its earnings last week but only grew 2% last quarter. Now remember the ETR survey, this is a forward-looking survey. So this potentially bodes well for the companies that are above that 40% line. Okay. So most so sorry of the companies on this chart only IBM and Oracle, those two own a public cloud. And we'll dig further into that in a moment, but virtually every name shown here, even Oracle has a mandate to redefine cloud. Meaning it has to put forth in our view in North star vision and execute on it. That will unify the experience between on-prem, hybrid cloud, public clouds, cross clouds and the edge. Now I say even Oracle, because in my view, Oracle is in a stronger position than the others, because of it's more coherent software architecture. Now the other companies on this chart, they have to architect a platform that abstracts the underlying complexity of clouds, leverage cloud native tooling in the respective public clouds. Connect on-prem infrastructure and build a layer, that stretches out and accommodates edge workloads. I think Oracle will follow suit and is actually ahead of most in a narrower context, i.e hybrid. But it doesn't have to race toward this vision. It can sit back as it often does, watch everyone else fumble around and make mistakes. And then Oracle will keep investing in R&D, watch the market, you know make its own experimental mistakes, and then enter the market and act like we invented it. Now, Cisco will come at this from a strong networking and security perspective. And it has a nice story on programmable infrastructure with Cisco DevNet. But unfortunately it does not own VMware as does Dell, but Dell is in the middle of a fairly remarkable journey. And it will be interesting to see what happens with the VMware spin-out and the cozy commercial relationship that Dell is structuring with VMware as you know, and as we've reported, Dell has used VMware's cash for a lot of this restructuring. And so we'll see, as it exits the current phase and enters a new phase, how it will be able to pursue that vision. It's going to be, whatever it does it's going to be much different than that vertically integrated Oracle approach, which of course brings me to IBM. Potentially Red Hat with OpenShift is the most powerful card in the deck right now. OpenShift I mean, it's open it's everywhere. It has momentum as we showed. And I like their position. My concern is IBM, IBM is still unwinding and restructuring its business. And it's taking a long time as we've seen, with its outsourcing business. And now the Watson health assets, Irvine is continuing that downsizing trend that we saw under Ginny, shedding non-strategic businesses that don't fit, Irvine has a lot to deal with. And I want to point out that this idea of an abstraction layer across clouds is not trivial. First, all of these companies have to stop being so defensive about the public cloud. To a large extent, VMware and Red Hat have found a happy place. But in my view, they all should be thanking AWS, Azure, and Google for building out this great global distributed system, that they can leverage and build on top of. And second, this is going to be expensive. And Cisco, Dell VMware, IBM, they're all really stretched thin from an R&D perspective. They a lot of mouths to feed across the portfolio. So is HPE stretched thin, and it doesn't have the R&D budget at less than $2 billion annually. So my concern is that we're going to have lots of complexity across these obstructions layers by vendor. Now maybe the good news for companies. This may be good news for companies like Hashi or specialists with a vision to do this within a domain like a clumial, or a vast data, but this is big, and they are small. So it's going to take the better part of a decade to play out. Now, let's take a quick look at the cloud players. OMG when I saw that article in Barron's last weekend my mouth dropped. What a headline and it had this illustration of a stout Larry Ellison rising above the clouds. Here's a picture of the ETR data for the cloud players. It's the same X, Y plotting or net score and market share. If you follow this program, you know we believe there are four and only four hyper scale cloud players, with the resources to compete and differentiate as horizontal infrastructure players, which really is how we view the origination of modern cloud computing. AWS created it with S3 and EC2 with 2006. Those four are AWS and Azure, which have a large lead over the pack. Google cloud and Alibaba. And you can see we've circled the on-prem pack which comprises Oracle and IBM along with Dell VMware. And we snuck Google just stuck them at the edge of that circle because the differentiate they're cozying up to companies with strong enterprise sales teams and Google's, they're smart, they're patient. And so we, by no means, count them out. They're spending like mad and they have a lot of cash. They've done some really interesting open source things with containers. And so, you know, no doubt they're a player, but they are behind. Now in that on-prem pack, IBM and Oracle they actually own their own public clouds. IBM, they acquired soft layer which was a bare metal hosting company at the time to get IBM into the game. They retooled the platform over several years. Now here's the thing, try and unpack IBM's cloud business looking at its financial or in earnings reports. It's just a mess. I hope Irvine cuts the nonsense and actually develops and reports a set of metrics that are meaningful to cloud observers and IBM observers, because the way IBM reports its cloud business today is opaque and it's nonsense. It's frankly embarrassing to the company. It needs to end sooner rather than later is fundamentally meaningless to any observers. Now observers of cloud. If you care about the big chunk of whatever then maybe it has meaning. Now Oracle for its part, they announced the public cloud years ago, its version of one datto cloud was crap. And the company, they hired a bunch of really smart cloud engineers and they spent a lot of money to fix that. Now neither IBM nor Oracle have the CapEx resources of the big four, not even close, yet they'll build out data centers and yes they'll have a play, but they're different and that's okay. Now in the Barron's article on Oracle, the author was quite positive on Oracle, noting that quote, "On a recent earnings call CEO Safra Catz said that Oracle cloud infrastructure revenue was up 139% for the quarter". So, (laughs) we have really no sense or a stake in the ground is to up from what? Anyway, noting further the author said, quote, "Alas! Oracle doesn't break out OCI sales and comps can be messy". Hmm, indeed. Oracle is hiding the ball on OCI, that's because if they did break it out, which by the way they used to report, AIS revenue explicitly, but if they did break it out, they would only be highlighting that they are a minor player in AIS. Further, the article continues, quote, "Catz says that hers is the only tech company that has both a global cloud and a full set of enterprise applications". Unquote, bingo. There it is. That's why Oracle is in a better position than many of or most of the on-prem players listed in this chart. By the way, I would argue that Microsoft has a pretty impressive set of enterprise applications in a fairly global cloud. But what Safra is talking about is applications that support the world's most mission critical work. And when it comes to that, Oracle is number one. Don't fool yourself and get caught up in the Oracle lock-in and high pricing narrative, thinking that they're going to get crushed. They're not. Oracle is the best in the mission critical workload game. There is no one better, period. But guys, come on. The big four last year grew 41% and accounted for $86 billion in AIS revenue, AKA real cloud revenue. And they're going to surpass $115 billion this year combined. Real cloud companies don't grow in the single digits today. So talk to me when we reach equilibrium on that front. Okay. So let's wrap by looking at what does a cloud company look like in the 2020s? Now, I'm not saying that the rest of the pack shouldn't redefine cloud they should. But I hope we can all agree by now that modern day cloud computing was defined in business terms by AWS. They are number one in cloud computing, make no mistake. However, AWS is bringing the cloud into the wheelhouse of the on-prem players, cleverly saying that it's bringing AWS to the edge and it looks at the data centers. Just another edge node is great positioning but that is not trivial. Just look it out posts and how AWS has had to evolve its pricing strategy in terms, can't just turn it off like you can, the public cloud. I have an entire rant on all the, SaaS service transformations. It's really interesting to watch as AWS goes out, and the on-prem players come in and go hybrid. I got a lot of thought on what's happening there both in terms of SaaS, which I think is an outdated pricing model, and the infrastructure as a service players that are really getting into this game, we would love to do a session on that sometime. And it's a real disruption I think coming. Anyway, AWS competitors should absolutely try to redefine cloud. By AWS moving to the edge, it's opened up the door to that possibility. Microsoft is obviously in the best position I think by far here. They've earned the right and I'll never accuse them of cloud washing. Google, they got some work to do in this regard, but they probably have the largest physical cloud infrastructure in the world. As I've said, they just need to pull their heads out of their ads and quadruple down on cloud. But this idea of abstracting away the underlying complexity of the cloud, leveraging cloud native capabilities and building on top of the shoulders of the cloud giants such as David Floyer has expressed in this chart, moving from stateless to state full, integrating across clouds, advancing automation not only through the stack, but across domains and ultimately using metadata to govern where workloads should live or be moved, be disintegrated and recombined with low latency and be highly secured. I look at this, I think about this and I say one there is this technically feasible and smart techies tell me yes, so I keep trying to dig here for signs and I definitely see some movement in this direction. And two, I don't think any one vendor is going to do this themselves. They're not going to, it's not going to be owned by one company. I think what's going to happen is you'll get successes within layers of the stack. I mean, think about Snowflakes data cloud. We're going to see that for storage. See it for backup, data management, security maybe security within different domains. You see endpoint and identity access management. Maybe that cloud comes together as cloud security. You see it in applications, but without clear standards, it's going to be a challenge. And with respect to my friends at Snowflake, we might even see it in database sometime LOL, but look you all have a lot of work to do. And to my CIO friends, you know the drill much better than I, technology is going to keep relentlessly coming at you and you can deal with that. It's the people and the change management in the culture. Those are your bigger challenges, but don't screw up the tech. Okay. Thanks for watching. Remember, these episodes are all available as podcasts wherever you listen, just search breaking analysis podcasts, and please subscribe to the series, we appreciate that. Check out ETR's website at ETR.plus sorry, ETR.plus. We also publish a full report every week on wikibon.com and siliconangle.com. You can email me at David.Vellante@siliconangle.com or DM me on Twitter at DVellante that's @DVellante or comment, excuse me on my LinkedIn posts. This is Dave Vellante for theCUBE Insights powered by ETR. Stay safe, be well, get the jab if you have an opportunity. And we'll see you next time. (soft music)

>> From the SiliconANGLE media office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. >> Hello, everyone, and welcome to this week's episode of theCUBE Insights, powered by ETR. In this Breaking Analysis, I want to do a quasi post-mortem on AWS re:Invent, and put the company's prospects into context using some ETR spending data. First I want to try to summarize some of the high-level things that we heard at the event. I won't go into all the announcements in any kind of great detail, there's a lot that's been written out there on what was announced, but I will touch on a few of the items that I felt were noteworthy and try to give you some of the main themes. I then want to dig into some of the spending data and share with you what's happening from a buyer's perspective in the context of budgets, and we'll specifically focus on AWS's business lines. And then I'm going to bring my colleague Stu Miniman into the conversation, and we're going to talk about AWS's hybrid strategy in some detail, and then we're going to wrap. So, the first thing that I want to do is give you a brief snapshot of the re:Invent takeaways, and I'll try to give you some commentary that you might not have heard coming out of the show. So, to summarize re:Invent, AWS is not being on rinsing and repeating, they have this culture of raising the bar, but one thing that doesn't change is this shock and awe that they do of announcements, it comes out each year, and it's obvious. It's always a big theme, and this year Andy Jassy really wanted to underscore the company's feature and functional lead relative to some of the other cloud providers. Now the overarching theme that Jassy brought home in his keynote this year is that the cloud is enabling transformation. Not just teeny, incremental improvement, he's talking about transformation that has to start at the very top of the organization, so it's somewhat a challenge and an appeal to enterprises, generally versus what is often a message to startups at re:Invent. And he was specifically talking to the c-suite here. Jassy didn't say this, but let me paraphrase something that John Furrier said in his analysis on theCUBE. He said if you're not born in the cloud, you basically better find the religion and get reborn, or you're going to be out of business. Now, one of the other big trends that we saw this year at re:Invent, and it's starting to come into focus, is that AWS is increasingly leveraging its acquisition of Annapurna with these new chip sets that give it higher performance and better cost structures and utilization than it can with merchant silicon, and specifically Intel. And here's what I'll say about that. AWS is one of the largest, if not the largest customer of Intel's in the world. But here's the thing, Intel wants a level playing field. We've seen this over the years, where it's in Intel's best interest to have that level playing field as much as possible, in its customer base. You saw it in PCs, in servers, and now you're seeing it in cloud. The more balanced the customer base is, the better it is for Intel because no one customer can exert undue influence and control over Intel. Intel's a consummate arms dealer, and so from AWS's perspective it makes sense to add capabilities and innovate, and vertically integrate in a way that can drive proprietary advantage that they can't necessarily get from Intel, and drive down costs. So that's kind of what's happening here. The other big thing we saw is latency, what Pat Gelsinger calls the law of physics. Well a few years ago, AWS, they wouldn't even acknowledge on-prem workloads, and Stu and I are going to talk about that, but clearly sees hybrid as an opportunity now. I'm going to talk more on detail and drill into this with Stu, but a big theme of the event was moving Outposts closer to on-prem workloads, that aren't going to be moving into the cloud anytime soon. And then also the edge, as well as, for instance, Amazon's Wavelength announcement that puts Outposts into 5G networks at major carriers. Now another takeaway is that AWS is unequivocal about the right tool for the right job, and you see this really prominently in database, where I've counted at least 10 purpose-built databases in the portfolio. AWS took some really indirect shots at Oracle, maybe even direct shots at Oracle, which, Oracle treats Oracle Database as a hammer, and every opportunity as a nail, antithetical to AWS's philosophy. Now there were a ton of announcements around AI and specifically the SageMaker IDE, specifically Studio, SageMaker Studio, which stood out as a way to simplify machine intelligence. Now this approach addresses the skillset problem. What I mean by that is, the lack of data scientists to leverage AI. But one of the things that we're kind of watching here is, it's going to be interesting to see if it exacerbates the AI black box issue. Making the logic behind the machines' outcomes less transparent. Now, all of this builds up to what we've been calling next-gen cloud, and we're entering a new era that goes well beyond infrastructure as a service, and lift and shift workloads. And it really ties back to Jassy's theme of transformation, where analytics approaches new computing models, like serverless, which are fundamental now, as is security, and a topic that we've addressed in detail in prior Breaking Analysis segments. AWS even made an announcement around quantum computing as a service, they call it Braket. So those are some of the things that we were watching. All right, now let's pivot and look at some of the data. Here's a reminder of the macro financials for AWS, we get some decent data around AWS financials, and this chart, I've showed before, but it's AWS's absolute revenue and quarterly revenue year on year with the growth rates. It's very large and it's growing, that's the bottom line, but growth is slowing to 35% last quarter as you can see. But to iterate, or reiterate, we're looking at a roughly 36 billion dollar company, growing at 35% a year, and you don't see that often. And so, this market, it still has a long way to go. Now let's look at some of the ETR tactical data on spending. Now remember, spending attentions according to ETR are reverting to pre-2018 levels, and are beginning to show signs of moderation. This chart shows spending momentum based on what ETR calls net score, and that represents the net percentage of customers that are spending more on a particular platform. Now, here's what's really interesting about this chart. It show the net scores for AWS across a number of the company's markets, comparing the gray, which is October '18 survey, with the blue, July '19, and the yellow, October '19. And you can see that workspaces, machine learning and AI, cloud overall, analytic databases, they're all either up or holding the same levels as a year ago, so you see AWS is bucking the trend, and even though spending on containers appears to be a little less than last year, it's holding firm from the July survey, so my point is that AWS is really bucking that trend from the overall market, and is continuing to do very very well. Now this next slide takes the same segments, and looks at what ETR refers to as market share, which is a measure of pervasiveness in the survey. So as you can see, AWS is gaining in virtually all of its segments. So even though spending overall is softening, AWS in the marketplace, AWS is doing a much better job than its peers on balance. Now, the other thing I want to address is this notion of repatriation. I get this a lot, as I'm sure do other analysts. People say to me, "Dave, you should really look into this. "We hear from a lot of customers "that they moved to the cloud, "now they're moving workloads back on-prem "because the cloud is so expensive." Okay, so they say "You should look into this." So this next chart really does look into this. What the chart shows is across those same offerings from AWS, so the same services, the percent of customers that are replacing AWS, so I'm using this as a proxy for repatriation. Look at the numbers, they're low single digits. You see traditional enterprise vendors' overall business growing in the low single digits, or shrinking. AWS's defections are in the low single digits, so, okay, now look at this next chart. What about adoptions, if the cloud is slowing down, you'd expect a slowdown in new adoptions. What this data shows is the percent of customers that are responding, that they're adding AWS in these segments, so there's a new platform. So look, across the board, you're seeing increases of most of AWS's market segments. Notably, in respondents citing AWS overall at the very rightmost bars, you are admittedly seeing some moderation relative to last year. So that's a bit of a concern and clearly something to watch, but as I showed you earlier, AWS overall, that same category, is holding firm, because existing customers are spending more. All right, so that's the data portion of the conversation, hopefully we put that repatriation stuff to bed, and I now want to bring in Stu Miniman to the conversation, and we're going to talk more about multicloud, hybrid, on-prem, we'll talk about Outposts specifically, so Stu, welcome, thank you very much for coming on. >> Thanks Dave, glad to be here with you. >> All right, so let's talk about, let's start with multicloud, and dig into the role of Kubernetes a little bit, let me sort of comment on how I think AWS looks at multicloud. I think they look at multicloud as using multiple public clouds, and they look at on-prem as hybrid. Your thoughts on AWS's perspective on multicloud, and what's going on in the market. >> Yeah, and first of all, Dave, I'll step back for a second, you talked about how Amazon has for years had shots against Oracle. The one that Amazon actually was taking some shots at this year was Microsoft, so, not only did they talk about Oracle, they talked about customers looking to flee their SQL customers, and I lead into that because when you talk about hybrid cloud, Dave, if you talked to any analyst over the last three, four years and you say "Okay, what vendor is best position in hybrid, "which cloud provider has the "best solution for hybrid cloud?" Microsoft is the one that we'd say, because their strong domain in the enterprise, of course with Windows, the move to Office 365, the clear number two player in Azure, and they've had Azure Stack for a number of years, and they had Azure Pack before that, they'd had a number of offerings, they just announced this year Azure Arc, so three, we've had at least three generations of hybrid multicloud solutions from Microsoft, Amazon has a different positioning. As we've talked about for years, Dave, not only doesn't Amazon like to use the words hybrid or multicloud, for the most part, but they do have a different viewpoint. So the partnership with VMware expanded what they're doing on hybrid, and while Andy Jassy, he at least acknowledges that multicloud is a thing, when he sat down with John Furrier ahead of the show, he said "Well, there might be reasons why customers "either there's a group inside "that has a service that they want, "that they might want to do a secondary cloud, "or if I'm concerned that I might fall out of love "with this primary supplier I have, "I might need a second one." Andy said in not so, just exactly, said "Look, we understand multicloud is a thing." Now, architecturally, Amazon's positioning on this is that you should use Amazon, and they should be the center of what you're doing. You talked a lot about Outposts, Outposts, critical to what Amazon is doing in this environment. >> And we're going to talk about that, but you're right, Amazon doesn't like to talk about multicloud as a term, however, and by the way, they say that multicloud is more expensive, less secure, more complicated, more costly, and probably true, but you're right, they are acknowledging at least, and I would predict just as hybrid, which we want to talk about right now, they'll be talking about, they'll be participating in some way, shape, or form, but before we go to multicloud, or hybrid, what about Kubernetes? >> So, right, first of all, we've been at the KubeCon show for years, we've watching Kubernetes since the early days. Kubernetes is not a magic layer, it does not automatically say "Hey, I've got my application, I can move it willy-nilly." Data gravity's really important, how I architect my microservices solution absolutely is hugely important. When I talk to my friends in the app dev world, Dave, hybrid is the way they are building things a lot, if I took some big monolithic application, and I start pulling it apart, if I have that data warehouse or data store in my data center, I can't just migrate that to the cloud, David Floyer for years has been talking about the cost of migration, so microservice architecture's the way most customers are building, a hybrid environment often is there. Multicloud, we're not doing cloud bursting, we're not just saying "Oh hey, I woke up today, "and cloud A is cheaper than cloud B, "let me move my workload." Absolutely, I had a great conversation with a good Amazon customer that said two years ago, when they deployed Kubernetes, they did it on Azure. You want to know why, the Azure solution was more mature and they were doing Azure, they were doing things there, but as Amazon fully embraced Kubernetes, not just sitting on top of their solution, but launched the service, which is EKS, they looked at it, and they took an application, and they migrated it from Azure to Amazon. Now, migrating it, there's the underlying services and everybody does things a little bit different. If you look at some of the tooling out there, great one to look at is HashiCorp has some great tooling that can span across multiple clouds, but if you look at how they deploy, to Azure, to Google, to AWS, it's different, so you got to have different code, there's different skillsets, it's not a utility and just generic compute and storage and networking underneath, you need to have specific skills there, so Kubernetes, absolutely when I've been talking to users for the last few years and saying "Why are you using Kubernetes?" The answer is "I need that eject lever, "so that if I want to leave AWS with an application, "I can do that, and it's not press a button and it's easy, "that easy, but I know that I can move that, "'cause underneath the pods, and the containers, "and all those pieces, the core building blocks "are the same, I will have to do some reconfiguration," as we know with the migration, usually I can get 80 to 90 percent of the way there, and then I need to make the last minute-- >> So it's a viable hedge on your AWS strategy, okay. >> Absolutely, and I've talked to lots of customers, Amazon shows that most cloud Kubernetes solutions out there are running on Amazon, and when I go talk to customers, absolutely, a lot of the customers that are doing Kubernetes in the public cloud are doing that on Amazon, and one of the main reasons they're using it is in case they do want to, as a hedge against being all-in on Amazon. >> All right, let's talk about Outposts, specifically as part of Amazon's hybrid strategy, and now their edge strategy as well. >> Right, so Azure Stack, I mentioned earlier from Microsoft has been out there for a few years. It has not been doing phenomenally well, when I was at Microsoft Ignite this year, I heard basically certain government agencies and service providers are using it and basically acting, delivering Azure as a service, but, Azure Stack is basically an availability zone in my data center, and Amazon looked at this and says "That's not how we're going to build this." Outposts is an extension of your local region, so, while people look at the box and they say, I took a picture of the box and Shu was like, "Hey, whose server and what networking card, "and the chipset and everything," I said "Hold on a second. "You might look at that box, "and you might be able to open the door, "but Amazon is going to deploy that, "they're going to manage that, "really you should put a curtain in front of it "and say pay no attention to what's behind here, "because this is Amazon gear, it's an Amazon "as a service in your data center, "and there are only a few handful of services "that are going to be there at first." If I want to even use S3, day one, the Amazon native services, you're going to just use S3 in your local region. Well, what if I need special latency? Well, Amazon's going to look at that, and see what's available, so, it is Amazon hardware, the Amazon software, the Amazon control plane, reaching into that data center, and very scalable, it's, Amazon says over time it should be able to go to thousands of racks if you need, so absolutely that cloud experience closer to my environment, but where I need certain applications, certain latency, certain pieces of data that I need to store there. >> And we've seen Amazon dip its toe into the hybrid on-prem market with Snowball and Greengrass and stuff like that before, but this is a much bigger commitment, one might even say capitulation, to hybrid. >> Well, right, and the reason why I even say, this is hybrid, but it's all Amazon, it is not "Take my private cloud and my public cloud "and tie 'em together," it's not, "I've taken cloud to customer" or IBM solution, where they're saying "I'm going to put a rack here "and a rack there, and it's all going to work the same." It is the same hardware and software, but it is not all of the pieces-- >> VMware and Outposts is hybrid. >> Really interesting, Dave, as the native AWS solution is announced first here in 2019, and the VMware solution on Outposts isn't going to be available until 2020. Draw what you will, it's been a strong partnership, there are exabytes of data in the VMware cloud on AWS now, but yeah, it's a little bit of a-- >> Quid pro quo, I think is what you call that. >> Well I'd say Amazon is definitely, "We're going to encroach a little bit on your business, "and we're going to woke you into our environment, too." >> Okay, let's talk about the edge, and Outposts at the edge, they announced Wavelength, which is essentially taking Outposts and putting it into 5G networks at carriers. >> Yeah, so Outposts is this building block, and what Amazon did is they said, "This is pretty cool, "we actually have our environment "and we can do other things with it." So sometimes they're just taking, pretty much that same block, and using it for another service, so one that you didn't mention was AWS Local Zones. So it is not a whole new availability zone, but it is basically extending the cloud, multi-tenant, the first one is done for the TME market in Los Angeles, and you expect, how does Amazon get lower latency and get closer, and get specialized services, local zones are how they're going to do this. The Wavelength solution is something they built specifically for the telco environment. I actually got to sit down with Verizon, this was at least an 18 month integration, anybody that's worked in the telco space knows that it's usually not standard gear, there's NEBB certification, there's all these things, it's often even DC power, so, it is leveraging Outposts, but it is not them rolling the same thing into Verizon that they did in their environments. Similar how they're going to manage it, but as you said, it's going to push to the telco edge and in a partnership with Verizon, Vodafone, SK, Telecom, and some others that will be rolling out across the globe, they are going to have that 5G offering and this little bit, I actually buy it from Amazon, but you still buy the 5G from your local carrier. It's going to roll out in Chicago first, and enabling all of those edge applications. >> Well what I like about the Amazon strategy at the edge is, and I've said this before, on a number of occasions on theCUBE Breaking Analysis, they're taking programmable infrastructure to the edge, the edge will be won by developers in my view, and Amazon obviously has got great developer traction, I don't see that same developer traction at HPE, even Dell EMC proper, even within VMware, and now they've got Pivotal, they've got an opportunity there, but they've really got a long way to go in terms of appealing to developers, whereas Amazon I think is there, obviously, today. >> Yeah, absolutely true, Dave. When we first started going to the show seven years ago, it was very much the hoodie crowd, and all of those cloud-native, now, as you said, it's those companies that are trying to become born again in the cloud, and do these environments, because I had a great conversation with Andy Jassy on air, Dave, and I said "Do we just shrink wrap solutions "and make it easy for the enterprise to deploy, "or are we doing the enterprise a disservice?" Because if you are truly going to thrive and survive in the cloud-native era, you've got to go through a little bit of pain, you need to have more developers. I've seen lots of stats about how fast people are hiring developers and I need to, it's really a reversal of that old outsourcing trend, I really need IT and the business working together, being agile, and being able to respond and leverage data. >> It's that hyperscaler mentality that Jassy has, "We got engineers, we'll spend time "on creating a better mousetrap, on lowering costs," whereas the enterprise, they don't have necessarily as many resources or as many engineers running around, they'll spend money to save time, so your point about solutions I think is right on. We'll see, I mean look, never say never with Amazon. We've seen it, certainly with on-prem, hybrid, whatever you want to call it, and I think you'll see the same with multicloud, and so we watch. >> Yeah, Dave, the analogy I gave in the final wrap is "Finding the right cloud is like Goldilocks "finding the perfect solution." There's one solution out there, I think it's a little too hot, and you're probably not smart enough to use it just yet. There's one solution that, yeah, absolutely, you can use all of your credits to leverage it, and will meet you where you are and it's great, and then you've got Amazon trying to fit everything in between, and they feel that they are just right no matter where you are on that spectrum, and that's why you get 36 billion growing at 35%, not something I've seen in the software space. >> All right, Stu, thank you for your thoughts on re:Invent, and thank you for watching this episode of theCUBE Insights, powered by ETR, this is Dave Vellante for Stu Miniman, we'll see you next time. (techno music)

[upbeat funk music] >> [Female Announcer] From our studios In the heart of Silicon Valley, Palo Alto California This is a Cube Conversation! >> Welcome to the Cube Studios for another Cube Conversation, where we go in depth with thought leaders driving business outcomes with technology. I'm your host, Peter Burris. When we have considered solving storage-related challenges, we found ourselves worrying about things like, how far does the device sit from the server? What kinds of wiring we were going to utilize, what kind of protocol was gonna run over that wiring. These are very physical concerns that were largely driven by the nature of the devices we were using. In a digital business that's using data as an asset, we can't think about storage the same way. We can't approach storage challenges the same way, we need a new mindset to help us better understand how to approach these storage issues, so that we're better serving the business outcomes and not just the device characteristics. Now to have that conversation about this new data services approach, we've got David Floyer, CTO and co-founder of Wikibon and my colleague, here on the Cube with us today. David, welcome to the Cube. >> Many thanks, yes. >> So David, I said upfront that we need a new mindset. Now I know you agree with us, but explain what that new mindset is. >> Yes, I completely agree that that new mindset is required. And it starts with, you want to be able to deal with data, wherever it's gonna be. We are in a hybrid world, a hybrid cloud world. Your own clouds, other public clouds, partner clouds, all of these need to be integrated and data is at the core of it. So that the requirement then is to have rather than think about each individual piece, is to think about services, which are going to be applied to that data and can be applied, not only to the data in one place, but across all of that data. And there isn't such a thing as just one set of services. There're going to be multiple sets of these services available. >> But hope we will see some degree of conversion so- >> Absolutely, yeah, there'll be the same ... >> Lexicon and conceptual, et cetera. >> Yeah, there'll be the same levels of things that are needed within each of these architectures, but there'll be different emphasis on different areas. If you've got a very, very high performance requirement, and recovery, speed of recovery is absolutely paramount with complex databases, then you're going to be thinking about, you know, oracle, cloud per customer as a way of being able to do that sort of thing. If you're wanting to manage containers in an area where it's stateless, then you've got a different set of priorities and requirements that you're gonna put together. >> But you wanna come instead of services. >> Yes. Let me give you an example. So I was talking to a CIO not too long ago, a client, guy I've worked with a lot and I was talking about the development world, and made the observation that you could build really rotten applications in Cobalt but you could also build really rotten applications with Containers. And he totally agreed and the observation he made to me was, you know, what microservices really is, it's an approach to solving a problem, that then suggest new technologies like in Containers, as opposed to being the product that you use to create the new applications. And so in many respects I think it's analogous to notion of data services. We need to look at the way we administer data as a set of services that create outcomes for the business, as opposed to, that are then translated into individual devices. So let's jump into this notion of what those services look like. It seems though we can list off a couple of them. >> Sure, yeah so we must have data reduction techniques. So you must have deduplication, compression, type of techniques and you want apply that across as big an amount of data as you can. The more data you apply those, the higher the levels of compression and deduplication you can get. So that's clearly, you've got those sort of sets of services across there. You must backup and restore data in another place and be able to restore it quickly and easily. There's that again is a service. How quickly, how integrated that recovery, again that's gonna be a variable. >> That's a differentiation in the service. >> Different, exactly. You're gonna need data protection in general. End to end protection of one sort or another. For example, you need end to end encryption across there. It's not longer good enough to say, this bit's been encrypted and then this bit's encrypted. It's gotta be an end to end, from one location to another location, seamlessly provided, that sort of data protection. >> Well let me press on that 'cause I think it's a really important point and it's, you know, the notion that weakest link determines the strength of the chain, right? >> Yeah, yep. >> What you just described says, if you have encryption here and you don't have encryption there, but because of the nature of digital you can start bringing that data together, guess what? The weakest link determines the protection of the old world data. >> The protection of the, absolutely, yes. And then you need services like snapshots, like other services which provide much better usage of that data. One of the great things about Flash and has brought this about is that, you can take a copy of that in real time and use that for a totally different purpose and have that being changed in a different way, so there are some really significantly great improvements you can have with services like snapshots. And then you need some other services which are becoming even more important in my opinion. The advent of bad actors in the world has really brought about the requirement for things like air gaps. To have your data with the metadata all in one place, and completely separated from everything else. There are such things as called logical air gaps, I think as long as they're real, in the real sense that the two paths can't interfere with each other, those are gonna be services which become very, very important indeed. >> And that's generally as an example of a general class of security data service is gonna be required. >> Correct, yes. So ultimately what we're describing is, we're describing a new mindset that says, that a storage administrator has to think about the services that the applications and the business requires and then seek out technologies that can provide those services at the price point, with the degree power consumption, in the space, or the environmentals, or with the type of maintenance and services, really the support that are required, based on the physical location, the degree to which it's under the control, et cetera. Is that kinda how we're thinking about this? >> I think absolutely and again, if there're gonna be multiple of these around in the market place, one size is not gonna fit all. If you're wanting super fast response time at an edge and if you don't get that response in time, it's gonna be no use whatsoever, you're gonna have a different architecture, a different way of doing it, than if you need to be a hundred percent certain that every bit is captured in a financial sort of environment. >> But from the service standpoint you wanna be able to look at that specific solution in a common way across policies and capabilities. >> Correct, correct. >> David Floyer! Once again thanks again for being on the Cube and talking about this important issue and thank you for joining us again. I'm Peter Burris, see you next time. [upbeat funk music]

(upbeat jazz music) >> From our studios, in the heart of Silicon Valley, Palo Alta, California. This is a Cube Conversation. >> Hi, welcome to the Cube Studio for another Cube Conversation where we go in-depth with thought leaders driving business outcomes with technology. I'm your host Peter Buriss. As enterprise is look to take advantage of new classes of applications like AI and others that make possible this notion of a data first or data driven enterprise in a digital business world. They absolutely have to consider what they need to do with their stored resources to modernize them to make possible new types of performance today, but also sustain and keep open options for how they use data in the future. To have that conversation we're here with David Floyer, CTO and co-founder of Wikibon. David welcome to the conversation. >> Thank you. >> So David you've been looking at this notion of modern storage architectures for 10 years now. >> Yeah. >> And you've been relatively prescient in understanding what's gonna happen. You were one of the first guys to predict well in advance of everybody else that the crossover between flash and HDD was gonna happen sooner rather than later. So I'm not going to spend a lot of time quizzing you. What do you see as a modern storage architecture? Let's, just let it rip. >> Okay well let's start with one simple observation. The days of standalone systems for data have gone we're in a software defined world and you wanna be able to run those data architectures anywhere where the data is. And that means in your data center where it was created or in the cloud or in a public cloud or at the edge. You want to be able to be flexible enough to be able to do all of the data services where the best place is and that means everything has to be software driven. >> Software defined is the first proposition of modern data storage facility? >> Absolutely. >> Second. >> So the second thing is that there are different types of technology. You have the very fastest storage which is in the in the DIRUM itself. You have NVDIMM which is the next one down from that expensive but a lot cheaper than the DIMM. And then you have different sorts of flash. You have the high performance flash and you have the 3D flash, you know as many layers as you can which is much cheaper flash and then at the bottom you have HDD and even tape as storage devices. So how. The key question is how do you manage that sort of environment. >> Where do we start because it still sounds like we still have a storage hierarchy. >> Absolutely. >> And it still sounds like that hierarchy is defined largely in terms of access speeds >> Yeap. >> And price points. >> Price points. Yes. >> Those are the two Mason and bandwidth and latency as well are within that. >> which are tied into that? >> which are tied into those. Yes. So what you, if you're gonna have this everywhere and you need services everywhere what you have to have is an architecture which takes away all of that complexity, so that you, all you see from an application point of view is data and how it gets there and how is put away and how it's stored and how it's protected that's under the covers. So the first thing is you need a virtualization of that data layer. >> The physical layer? >> The virtualization of that physical layer. >> Right right. >> Yes. And secondly you need that physical layer to extend to all the places that may be using this data. You don't wanna be constrained to this data set lives here. You want to be able to say Okay, I wanna move this piece of programming to the data as quickly as I can, that's much much faster than moving the data to the processing. So I want to be able to know where all the data is for this particular dataset or file or whatever it is, where they all are, how they connect together, what the latency is between everything. I wanna understand that architecture and I want to virtualize view of that across that whole the nodes that make up my hybrid cloud. >> So let me be clear here so, so we are going to use a software defined infrastructure >> Yeah. that allows us to place the physical devices that have the right cost performance characteristics where they need to be based on the physical realities of latency power availability, hardening, et cetera. >> And the network >> And the network. But we wanna mask that complexity from the application, application developer and application administrator. >> Yes. >> And software defined helps do that, but doesn't completely do it. >> No. Well you want services which say >> Exactly, so their services on top of all that. >> On top of all that. >> Absolutely. >> That are recognizable by the developer, by the business person, by the administrator, as they think about how they use data towards those outcomes not use storage or user device but use the data. >> Data to reach application outcomes. That's absolutely right. And that's what I call the data plane which is a series of services which enable that to happen and driven by the application requirements themselves. >> So we've looked at this and some of the services include end end compression, duplication, >> Duplication. backup restore, security, data protection. >> Protection. Yeah. So that's kind of, that's kind of the services that now the enterprise buyer needs to think about. >> Yes. >> So that those services can be applied by policy. >> Yes. >> Wherever they're required based on the utilization of the data >> Correct. >> Where the event takes place. >> And then you still have at the bottom of that you have the different types of devices. You still have you still won't >> A lot of hamsters making stuff work. >> You still want hard disk for example they're not disappearing, but if you're gonna use hard disks then you want to use it in the right way for using a hard disk. You wanna give it large box. You want to have it going sequentially in and out all the time. >> So the storage administration and the physical schema and everything else is still important in all these? >> Absolutely. But it's less important, less a centerpiece of the buying decision. >> Correct. >> Increasingly it's how well does this stuff prove support the services that the business is using to achieve your outcomes. >> And you want to use costs the lowest cost that you can and they'll be many different options open, more more options open. But the automation of that is absolutely key and that automation from a vendor point of view one of the key things they have to do is to be able to learn from the usage by their customers, across as broad a number of customers as they can. Learn what works or doesn't work, learn so that they can put automation into their own software their own software service. >> So it sounds like we talking four things. We got software defined, still have a storage hierarchy defined by cost and performance, but with mainly semiconductor stuff. We've got great data services that are relevant to the business and automation that mask the complexity from everything. >> And a lot of the artificial AI there is, automated >> Running things. Fantastic. David Floyer, talking about modern storage architectures. Once again thanks for joining us on the Cube Conversation. And I'm your host Peter Burris. See you next time. (jazz music)

>> (narrator) Live from Las Vegas, it's the Cube, covering VMWorld 2018. Brought to you by VMware and its ecosystem partners. >> Welcome back to Las Vegas everybody. You're watching the Cube, the leader in live-tech coverage. My name is Dave Vellante and I'm here with my co-host, David Floyer. Good to see you again David. VMWorld day three, wall to wall coverage. We got sets going on. 94 guests. Patrick Osborne is here, he's the Vice President of Big Data and Secondary Storage at Hewlett Packard Enterprise. Patrick, it's great to see you again. >> Always a pleasure to be on the Cube. >> Big quarter, Antonio Neri early into his tenure. >> Yes. The earnings, raise guidance, great to see that. Got to feel good. Give us the update, VMworld 2018, what's happening with you guys? >> So Q3 was bang up quarter, for all segments of the business. It was great, you know. Obviously it's the kind of earnings you want to have from a CEO in a second quarter. Steering the ship here. I think everyone's jazzed up. He's brought a lot of new life to the company, in terms of technology leadership. He's someone who's certainly grown up, from the grounds up, starting off his career at HPE. So for us who have started off as a Product Manager, an individual contributor, making your way up to CEO is definitely possible. So that's been great and I think it's favorable micro economics and we're taking advantage of that. VMworld's been awesome. I think this whole story around Multicloud and obviously we talk about hybrid IT at HPE, so it fits very well. VMware Technology, partner of the year, again. Four years running, so it's been a really good show for us. >> As last year, data protection is the single, hottest topic. Data protection, obviously Cloud, The Edge, but The Edge is kind of new and it's hot, it's sexy. But in terms of actual business that's getting done, companies that are getting funded, companies getting huge raises, throwing big parties. We saw you back to back nights at Omnia, it's a lot happening in data protection. HPE has got a whole new strategy around data protection. Maybe talk about that a little bit and how it's going. >> So it's going really well, like you said, that part of the market, it's pretty hot right now. I think there's a couple of things playing into that, certainly this new style of IT, like applied to secondary storage. We saw that with primary storage the last few years. Multicloud, the move to all flash, low-latency workloads. And then, certainly a lot of the things, in that area, are disrupting secondary storage. People want to do it different ways, they want to be able to simplify this area. It's a growing area for data, in general. They want to make that data work for them. Test, Dev, workload placement, intelligent placement of data, for secondary and even tertiary storage in the cloud. So a lot of good things happening, from an HPE perspective. >> So not just back up? >> No, not just back up. >> I want more out of my insurance policy. >> Exactly. Something in the past that was moving from purely a TCO type of conversation. My examples are always like, who likes to pay their life insurance premium, right? Because at the end of the day, I'm not going to derive any utility from that payment. So now, it's moving into more ROI. So we have things like, the Hybrid Flash Array, from Nimble, for example. It allows you to put your workloads to work. We have a great cloud service, called HPE Cloud Volumes, that we use for our customers to be able to do intelligent DR, as a service, and be able to apply Cloud compute to your data. So there's a lot of things going on, in the space, that's just outside of your traditional move data from point A to point B. Now you want to make it work for you. >> And what about the big data portfolio? You hear a lot about data. You don't hear a ton about the Big Data, Hadoop piece of the world. I know Hadoop, nobody seems to be talking about that anymore. But everybody's talking about AI, Machine-Learning, Deep-Learning. Certainly The Edge is all about data. What's the Big Data story? >> So at HPE, we're definitely focused on the whole Edge to Core analytic story. So we have a great story and you can see in the numbers from Q3, The Edge business, The Edge line servers, Aruba, driving a lot of growth in the company, where a lot of that data is being created. And then back into the Core, so for Big Data, we see a number of customers, who are using these tools to affect digital transformation. They're doing it, we're doing it to ourselves. So they're moving from batch oriented, to now fast data, so streaming analytics. And then, incorporating concepts of AI and ML to provide better service or better experience for their customers. And we're doing that with, for example, InfoSight. So we have a great product, Nimble, 3PAR. And then we provide a service, on top of that, which is a SAS based service. It has predictive analytics and Machine Learning. And we're able to do that, by using Big Data analytics. >> You're offering that as a service, as a SAS service to your customers? >> Absolutely. And the way we're able to provide those predictive analytics and be able to provide those recommendations and that Machine-Learning across a entire portfolio and be able to scale that service, because it's a service, we got tens of thousands of users using the service on a daily basis, is moving from an ERP system, data warehouse, to batch analytics, to now we're doing Elasticsearch and Kafka and all these really cool techniques, so it's really helped us unlock a lot of value for our customers. >> So, the Nimble acquisision is interesting, it's bringing that sort of Machine-Learning and AI to infrastructure. You got a lot of automation in the portfolio and you can't really talk about Cloud without talking about automations. So talk a little about automation. >> In particular, even at the show here this week, we are a premier technology partner with VMware and I think more that you see in the VMware Ecosystem is all around Cloud and automation. That's really where they're going. And we've been day-zero partners on a lot of different fronts. So VMware Cloud Foundation integration, we do things on the storage level with Vvols and SRM and all these things that allow customers to essentially program that infrastucture and get out of the mundane tasks of having to do this manually. So for us, automation is key part of our story here. Especially with VMware. >> So going a little bit further with that, what sort of examples, what benefit is this to your customers? How are they justifying putting all this in? >> It's a hybrid world, so our customers are going to expect, from us, as a portfolio vendor, the ability to provide an automated solution, on premises, as automated as what you'd get in the cloud. So for us, the ability to have a sourcing experience, that we call GreenLake, so you can buy everything from us, from a solution perspective, in a pay-as-you-go elastic model where you can flex-up, flex-down. And then being able to, essentially provide a different view, depending on what persona you're coming from. Obviously we've been focused on the infrastructure persona, more often, we're getting into the DevOps persona, the Cloud engineer persona, providing all of our infrastructure, whether it's computer networking or storage, that plugs into all these frameworks. Whether it's Ansible, Chef and all these things that we do around our automation ecosystem, it's pretty ubiquitous. >> You're touching on all the Cloud basis and you're seeing a lot of discussion around that. What are you hearing from customers? Sometimes we have to squint through this, a lot of the guys here, we always like to say, move at the speed of the CIO, which sometimes is slow. At the same time, they're all afraid they're going to get disrupted. HPE, over the last two or three years, has really brought in and partnered with some of the guys your talking about. Whether it's containers and companies that do those types of offerings. How fast do the customers actually adopting, where they adopting them, how are they handling, you talked about a hybrid world; How are they bridging the old and the new? >> That's a great question. For a lot of our customers, it's always a brown field conversation. You do have these mission critical workloads that have to run, so there's no Edge to Core without your core ERP system, right? Your Core Oracle System or for smaller customers that are running their businesses on SQL and other things. But what we're seeing is that, by shoring up that Core and we provide a set of services and products that we feel are the best in the industry for that. And then allow them to provide adjacent services on top of that, it's exactly like the same example we had with InfoSight, where those systems use to call home, right now we're taking that data, we're providing a whole ancillary set of services and functions around it and our customers are doing that. Enormous customers, like British Telecom, folks like Wayfair, for example, they're doing this on premises and their disrupting their competitors, in the mean time. >> What do you make of some of the announcements we've heard this week? Obviously VMware making a big deal with what's going on with AWS. We're seeing AWS capitulate, David Floyer you made the call. Got to have an on-prem strategy. Many said no, that'll never happen. They just want to sweep the floor. So that's a tip to the hybrid cap. What are your thoughts on what's going on there? How does HPE sort of participate in those trends? >> I'd say it's, instead of battle and capitulate, we've been very laser-focused on the customers and helping them, along their way, on the journey. So you see a lot of acquisitions we've done around services, advisory service. CTP is a perfect example. So CTP has a whole cadre of experts who understand AGER, who understand ECS and all the services and functions that go along with them And we're able to help people, right size, right place, whatever you want to call it, within their infrastructure. Because we know, we've been in business for 75+ years and have a very loyal customer base, and we're going to help them along their maturity curve and certainly everyone's not on the same path, in the same race. It's been pretty successful so far. >> You guys tend to connect the dots between your HPE Discover in U.S., in Las Vegas and HPE Discover in December. So June to December, you're on these six month cycles, U.S. focus and Europe focus, Decembers in Madrid, again. Second year of Madrid. U.S. is always Vegas, like most of these conferences, what's the cadence that your on? What was the vibe like at Discover? What should we expect leading up to Q4, calendar Q4 in Madrid? >> I'd say that Discover was a big success in Vegas, always fun to spend time here. In Madrid, you'll see a focus around the value part of our business. So we've been growing in automation, we talked about hybrid IT, certainly the Core around storage. We're really focusing and very heavily invested in, not just storage, but intelligent data management. So we really feel that our offerings, especially doubling down and offering more services around InfoSight and some of those predictive and Cloud-ready user stories for our customers is something that definitely differentiates ourselves in the market. So we'll be very focused on the data plan, the data layer and helping customers transform in that area. >> So let's talk some tenor sax. >> (David laughs) >> This is not New Orleans. When we were down in New Orleans, we were at VeeamON, I think you had your sax with you, you jumped in. >> That's right, I played with the Soul Rebels. >> Playing with the Soul Rebels, you were awesome. Leonard, a big jazz man. Love it. I'm a huge TOP fan. What's new in that world? Are you still active? Are you still playing? >> Yeah, the band's still playing. Shout out to my buddies in Jolpe, sitting in with some friends at a Dead cover band coming up, in a couple weeks. So, should be fun. We're going to reenact The Grateful Dead and Branford Marsalis. >> That's wonderful. >> It should be fun. >> We've been getting a big dose of hip-hop this week. >> Yeah. But the new thing is that, in hip-hop, it's getting back to it's original roots, so a lot of folks in the jazz world, collaborating with the folks in the hip-hop world, so not very commercial, definitely underground, but pretty cool. >> I love it. That's right Leonard, you pointing out Miles Davis was one of the first to make that transformation. >> Yeah >> Good call. >> I'm going to get the numbers wrong, but it's about five percent technique and 95 percent attitude. (multiple laughs) >> Jazz, like hip-hop, there's a lot guys just doing their own thing. And somehow it all comes together. >> Absolutely. >> Okay Patrick, great to see you. >> Great to see you guys. Thank you Dave. Yeah, good to see you guys. >> Always a pleasure, go Sox. >> We got some time for talk stocks? >> Alright. >> What do you think? It's getting a little nerve wrecking. >> #Bucky Dent is trending in my Twitter. That's my problem, so hopefully we can..., I definitely don't want to be limping into the playoffs, and still not a fan of this one team wild card playoff, but I think we'll be alright. >> If we go deep... It's a great time to be a Boston fan. >> Celtics. >> Football starting, Celtics are coming in November, so awesome. Great to see you man. >> Thanks for having me. >> Keep it right there everybody, we'll be right back with our next guest. You're watching the Cube, live. Day three at VMWorld 2018, we'll be right back. (techno music)

(intense orchestral music) >> Hello and welcome to this special VMworld preview, I'm John Furrier, co-host of theCUBE, here in the Silicon Valley, Palo Alto offices for theCUBE. I'm here with Peter Burris, head of research at SiliconANGLE media and Wikibon team. We're hear kickin' off, what we're going to talk about at VMworld, what we expect to see at the event in Las Vegas; and what are some of the highlights from the news, what's going to be discussed. Peter, great to see you. >> Great to be here John. >> I know you've been workin' hard, we're going to talk about this new true private cloud report that you put out, very comprehensive, a lot to go through, so, we're going to digest that, we're going to unpack that. But first, we're going to have theCUBE there for you know three days. >> Two sets right? >> Two sets. So, second year in a row we have two sets at VMworld. 72 thought leaders and interviews in the middle of the hang space, if you're going to to to VMworld, go to the hang space and look for us, come say hello there's some little cough areas to hang out. Come visit us, say hello, check in if you're an influencer, we're going to come preview some new technology we're going to show there, so, don't forget to ask about that, take a look at the video or the variety of tools we have with theCUBE Digital Tooling and Video Services. But, most notably, there's going to be a lot of headline news, Andy Jassy's going to be giving a keynote, we've got that confirmed on Twitter; and a lot of discussion around the future of the data center, future of IT, certainly of how cloud and on-premises are going to intersect. This is has been a groundbreaking report from Wikibon for the third year of the true private cloud report. So let's unpack that, because I think this is a notable backdrop to VMworld is that as everyone's been saying hybrid cloud, now multi cloud, essentially the same thing. The cloud is a great resource, on-premises (laughs) is not going away. It used to be aspirational to have this notion of having cloud operations. Your report is now definitively saying it's no longer aspirational, it's actually happening. So take a minute to explain the report in it's third year some of the key findings. >> Well the, we might want to, we want to step back a little bit and say what's goin' on with VMware? Because VMware's progress and both what it's enabling, and what constraints it still faces, are going to have a lot to do with what happens in the report. But speaking about the report specifically, True private cloud was a concept that David Floyer, Stu Miniman, kind of devised a number of years ago, and the simple observation is that ultimately a lot of hardware vendors, a lot of system vendors, were just taking the word cloud and slapping it on their hardware and saying oh here's our replacement strategy, does it have anything to do with cloud? Well, kind of, yeah, but not really. And their observation was increasingly, customers are going to want that cloud experience and the basic notion of true private cloud, and what all of our research shows, is that inevitably what's going to happen is the customer's not going to move their data to the public cloud en mass; there's going to be certainly some important elements that are going to there, it's no question about that, but then increasingly they're going to try to bring cloud, the cloud operating model, the cloud experience, down to where the data resides; and that's going to be at the edge, and that's going to be at what others call the core, on-premises. And near premises, so, you know side-by-side with public cloud players in in a number of different hosting companies. So the very concept is the requirements or the attributes of the data are going to dictate where the workloads operate, and increasingly those, that's going to demand an on-premises capability that still satisfies the basic notions of cloud. >> Great, that's a great backdrop. Now let's talk about VMware, and let's, I have something that I want to talk about the direct cloud report, we'll get into that. VMware had two or three years ago, Pat Gelsinger was under the gun, you know with the pressure of the Dell merger looming, what the future is going to be in there. Since then the performance of VMware has been spectacular financially, he's really proud of that. Some new products pivoting, I want to get what you're hearing first, but what I'm hearing is and I want to give you something, give you a chance to respond, I want to get your reaction. VMware has seen some acceleration over the years around vSphere, around kind of good, stable, that haven't lost anything with vSphere, so, one of their core products, virtualization storage; but their large accounts are stable in the Fortune 500, losing some business maybe in the lower accounts, but as the AWS, Azures, and Google Cloud, cloud native players are growing, the emerging products are front and center for VMware. vSAN, NSX, obviously the driver which we'll want to double click on, and the vCHS, the VMware vCloud Hybrid Service. These are, specifically the vSAN getting momentum, and these emerging products, how important is that for VMware? Obviously their stability is IT footprint. But why is the cloud driving some of these new emerging behaviors? >> Look, every company wish they had the install base that VMware has, and that install base is predicated on VDI, or Video Desktop Integration, Virtual Desktop Integration. It's vSAN, which is the use of VMware as a basis for virtualizing storage, and obviously all the stuff that's associated with virtualizing hardware. You know, John, it's interesting, if you think about what made the cloud possible, certainly AWS took on the heavy duty the heavy lifting associated with actually creating a business, and it's obviously you know very successful, but it all started with the idea of virtualization, and the notion that you could in fact bring virtualization in on top of hardware sources and generate a lot of not only cost avoidance, but also increasing flexibilities; you can get better utilization but also increase your flexibility, and that's one of the things that made the cloud possible. And so if we think about the VMware install base, that's where it all starts. It's the ability to get greater utilization and greater flexibility on-premise, and now it's moving into the cloud. So we got three basic questions for for VMware that we're looking at. One, there's been a lot of chatter about the relationship between Dell EMC and VMware, and what does that mean? You know Dell EMC is carrying a pretty significant debt load these days, and, there is visibility in where it's going to go, but VMware, as a brand is worth an enormous amount of money. So how does Dell EMC better you know increasingly attach itself to VMware is an interesting question, and what does that mean for the ecosystem? >> Having perverse incentives possibly versus-- >> Possibly, possibly, but we want to get that, there has to be a constant promise from VMware that they're going to take care of the ecosystem first with Dell EMC as a big participant in that. So that's the first thing, especially these days with all the financial chatter. Second thing is, this AWS agreement is really really important, and a lot of people are questioning is it a one way street? Do you just, you know, sure we have virtualization in cloud, we got virtualization here, does it make it easy to bring stuff up to VMware? What happens once it, or up to AWS, what happens once workloads get up there? Is AWS going to try to you know facilitate a migration? That's still a very very challenging technical problem, but we'll see a lot more, Andy Jassy has the keynote as you said, about how that partnership is working and where it's actually going. Because there will be a requirement also to be able to take workloads out of AWS, and out of public clouds, and bring 'em down on-premise. >> Hence the two-way street that you're looking for. >> Got to be a two-way street. A simple example, we're going to see increasing, in the AI world, we're going to see more modeling occurring in cloud, more training occurring in cloud, and more inferencing learning out on the edge and the core. Well, we want to see, you know VMware certainly wants to see more of those workloads being virtualized. And that leads to the third question what's the VMware story with IOT, with the edge? That is very very unclear at this point in time, and there's a lot of work that's going to have to be required to put into. And so I think that those are the three things that we're really focusing on, and how does VMware answer those questions can have a lot to do with future architectures, future business models, and future partnerships. >> And it's important, I think the edge one is clearly obvious that the don't have much announced, but that have to put a stake in the ground at some point. >> Absolutely. And you know, the reality is, the edge has real-time, often is associated with real-time, high performance, every throughput, very lightweight execution. >> Uses the cloud, uses the data center. >> Uses the cloud, uses the cloud, uses you know servos computing is an example, containers, those things all don't require a virtualized machine. >> I want to get your reactions on something, I sent an email out to a bunch of buyers, of friends in the network of theCUBE alumni and our networks and I asked them a question, I said: what do you think about VMware's prospects going forward as a buyer of technology, as you're transforming your organization from the obvious on-premise operating model to hybrid? Which they're all doing pretty much, and are agreeing to it. So the aspirational aspect was confirmed, to your point. So they responded, (laughs) and they said look it, VMware remains largely flat across server, infrastructure, storage, and virtualization buying. >> In terms of growth? >> No, what they're buying and growth, growth, no they're not really paying much attention to that, they're saying it's pretty flat, we're not going anywhere it's not going down, it's not going up per se, in the core segments. They said the main thing is going to be the emerging technology so vSAN, NSX, and vCHS. Then I asked 'em I said: What do you like about VMware, what do you think they're strong in? They said: well, we like the fact that they got, that they have technology, okay, and if they can keep the technology lead we're interested, so that's a question also, I'll get that in a second, the relationships that they've had with VMware, the supplier relationships, rinse reset a feature of products, and then compatibility with their existing IT footprint. I then asked 'em what're you worried about? (laughs) And they said: well, if there's a discussion about replacing VMware, it's around price cost and technology lag. Your reaction to those two points? >> First point is, again, there's no question that VMware has a great install base of customers that are thinking about what it's going to mean, and I think the most important observation is that, and we'll learn more about how many enterprises really are starting to move their virtual machines up to AWS, for example, more than VMware next week. But I also think that it provides cover for you know a CIO or VP of infrastructure to say yeah I'm going to continue to invest here, and I'm going to, you know, have the option of moving to something else. And there will be a lot more options for what you do with a VMware virtual machine in the future. Regarding the question of whether it's flat or not, I think one of the reasons why that perception is there, is because the hardware business overall has been flat, and VMware is a derivative of play in the hardware business, so, at least until recently. In many respects now it's dragging some of it forward because VMware allows you to put off additional hardware purchases. So we'll see where that cycle ends up, we might be at the nadir of that cycle, but I certainly think that we're seeing-- >> It's mature for sure, I mean. >> It's mature. But it used to be that you'd buy new hardware and then you'd put VMware on top of it to virtualize it, so you could get more productivity out of it. But as hardware's slowed down, why would you buy more VMware? But I think what's happening now is people are thinking first in terms of buying VMware, and what workloads you need to put on there, how they want to set those workloads up, and then looking for hardware to do that, and increasingly looking through the cloud. The third thing I'd say is that look, the VMware cloud foundation, and NSX, are two incredibly important technologies. For example-- >> Well hold on before you go there, 'cause I want to drill down on this because, one of the things that I mentioned in there which is a key word is existing IT footprint; this is a reality, some call it legacy. Having an IT footprint with VMware is not going to get you in trouble because of the path of the cloud, 'cause you've got cloud native, things like Kubernetes down the road, but that footprint's the base foundation. So as NSX comes in, (laughs) and the cloud foundation, interesting new lever. How does those enabling components fit for the enterprise who's sittin' there sayin' I got an existing IT footprint, I got all these clouds on the horizon, why NSX, why is the vCloud foundation important? >> Yeah, so let's start with VCF, VCF provides, or is a, takes you maybe 75, 80% of the way there to that cloud experience on-premises; a VMware based cloud experience on-premises. So, it's a really nice bundling of technology, that provides a relatively simple way of deploying, configuring, maintaining, and ultimately retiring workloads. So, it's a nice package for a lot of enterprises that have that VMware experience. That's a different story from NSX, so, on the cloud foundation standpoint, if you need to demonstrate to your board and to your CXO, and to your line of business people, that you are not just have an option to go to the cloud, but you're actually bringing that experience more to the business, a lot of customers are kickin' the tires on VCF, and it's a good thing to do. NSX is a little bit different. NSX, if we think about the long term, there has always been a need to flatten networks in the enterprise. Having that network, and that network, and that network, and trying to inter-network them together through bridging and gateways, is extremely problematic, even at the network level. It requires-- >> In terms of sprawl and complexity, or both? >> In terms of complexity, in terms of the amount of processing, I mean the cost of doing address translation and takin' packets and re-formatting them for different workloads in the network; very, very difficult to do. Now, you add programmability atop of that, 'cause at the end of the day, cloud is effectively a network program model. Very, you know, hey, you got a big problem on your hands. Somebody at some point in time is going to make, is going to build a $50 billion company around the idea of inter-networking clouds. I don't know who it is. >> Cisco wants to do it. >> Cisco would like to do it, but Cisco, quite frankly, probablyyyy, you know they could have started this process five or six years ago, and they didn't get out there. VMware took some steps to do that. NSX is a pretty good candidate right now, if we're thinking about how we build inter-networked multi cloud environments. >> So, you used the example before you came on camera, that you have this segment that in the old world of network stacks SNA, DECnet, variety whether stacks had proprietary things and bridges happened, to your point, to your explanation. And then TCP/IP came up and flattened it, TCP/IP. >> Yeah, just flattened it all out, made 'em all go away. >> So clouds aren't networks, but they're cloud environments, same concept, but flattening 'em out. >> Well, they are networks, at the end of the day they really are networks. >> They're a network of machines. >> Yeah, they're a network of services, they're a network of machines. >> So, explain the flattening piece, is it, are we still in the early stages of that, are you seeing visibility? >> Very much so. >> What are some data points around this? >> So the, and you said earlier, that the multi cloud, hybrid cloud are really the same, well today they are. We might envision a day when they're not, here's why. Hybrid cloud is I got this cloud, I got that cloud, it's more of a where is the data located, how am I going to run those environments together. Multi cloud is I got multiple clouds that I have to inter-network, and I have to bring together. I want to run a job in one of the Oracle application clouds, that also touches some of the machine learning that you get out of Google Cloud, and increase and include some of the retail capabilities you get out of AWS. That is a very very realistic scenario, it's going to happen, people are doing that kind of stuff right now. >> And that's the preferred outcome people are looking for? >> That's the preferred outcome that people are lookin' for. Well, each of those different environments are going to have an economic incentive to say yeah, that's great do that, but bring more of the workload into my cloud, 'cause I'm going to create interfaces that are a little bit better at working together than you know you can get from the inter-networking side. Well, they'll still have to stay open, but you know some of those environments are going to be better at that than others; but at the end of the day you want no penalty whatsoever, other than latency and where the data's located from amongst these different services. And so eventually what we're going to want to do is we're going to see the inter-networking itself flatten, where're the jobs, how the jobs are set up: flattened. Make it easier to move data, and jobs or workloads out of one cloud and be able to put it in another, because of any number of different reasons. And so, that's-- >> Yeah, competitive advantage, different economics, different product features >> Regulatory regimes change, you know what happens if if in Germany they decide to do something else from other than GDPR, what's it going to mean? >> So is NSX going to be that connector, you kind of think? >> NSX-- >> Has the opportunity. >> Has the potential to be that kind of connector. So an enterprise that's looking at how they can increase their set of options, their flexibility, their ability to bring networking closer to workload. NSX is as good of, that I know about, that we know about, as good an option out there as any. >> I want to ask you before we move onto the true private cloud versus private cloud and that whole report you did to private cloud in the third year. We're seeing a trend around the operating side, the personas are developing Google Cloud Next conference, the notion of an SRE, you know sight reliability engineer. Public cloud has always been known as developer friendly, very developer oriented, cloud native, all the developers love containers, Kubernetes, Istio, and a lot of cool services are coming out. But now with VMware, they kind of own the IT footprint from an operating model, operating the networks. The bridging of those two worlds are kind of coming together, right now we don't see a lot of cross over yet between pure cloud native developers in VMware ecosystem. Your thought on that connection to those personas, how it relates to how the ecosystem's rolling out, your thoughts? >> Yeah, you know John, I think that's going to be the big challenge for the next couple of years, literally, in the next couple of years. That ultimately, developers love the public cloud because they can avoid operations of people. Increasingly the public cloud players are going to have to provide platforms. And you know everybody talks about I, you know infrastructure as a service versus pass as a service, or platform as a service. But when, in Amazon, Google, Azure, Oracle, IBM Software, all of these guys are going to have to add capabilities that are that much more intriguing and interesting to developers. Bringing the enterprise developer into this ecosystem is the next big round of competition, 'cause those people aren't going to go away, they're too important to the future of business. And, to the degree that VMware can provide, and I think this is the best that they can do, a neutral platform for those guys as opposed to starting to introduce you know machine learning services on VMware or or, you know, anything beyond some of the platform stuff that Dell EMC has Pivotal, and what not, on VMware. Yeah, we can expect to see greater integration for that, but I think ultimately what VMware needs to be is a phenomenal target for stuff that's written over here, that needs to run over there, and have it run on VMware, I think that's ultimately what's going to happen. >> Alright Peter, great stuff, now let's talk about the true private cloud report, 'cause I think VMworld is always a beacon, always a bellwether for what's going on in IT, with respect to on-premises private cloud, or true private cloud, or hybrid cloud, IBM as well, and some others, they're always a leader in engineering. Before we get into the report, first describe the difference between what true private cloud is and what people have called private cloud. Because the term private cloud's been kicked around, going back I think 2012 I first heard-- >> Oh, private cloud, I first heard the term private cloud in probably 2005, 2006. >> But you guys have nailed this definition called true private cloud. What does it mean, what's the difference? >> So, the idea is, the cloud experience wherever the data requires it, and increasingly data is going to require it at the edge, in the core, in the data center, you know, local to the business; because of latency issues, because of cost of bandwidth issues, because of regulatory issues, because of IP control issues, any number of other issues, there's going to be an increasing distribution of data; workloads are going to follow that distribution of data, and the systems have to be there to run it. But we want to have a common vision of how those workloads are operated, and a common model for how we pay to run those workloads. So when you think about true private cloud, it's basically, we want the cloud experience, which includes, you know simplicity, the one throat to choke, the regular and non-invasive upgrades and enhancements to software; we want to add to it, kind of the management interfaces that we're associating with the cloud, but also the pay as you go, and the flexibility to scale up and the greater plasticity to be able to add services. We want all of that, but in a footprint on premise. >> And that's for true private cloud? >> And that's what we mean by true private cloud. Now if you go back a few years, companies would you know, you'd get a hardware company that'd say oh look, cloud is Linux plus some manned control interfaces, no problem, we can put that directly into our operating system or have a management interface on our platform, now we can go on cloud. >> And put it in your data center. >> And put it in your data center. But you still paid for everything up front, you have to deal with software patches and upgrades, because it's software that's installed. >> So it's an operating model, how you're consuming technology, how you're buying it. >> Operating model, how you consume the technology, and the flexibility, and the future of the modern application approach, which is services oriented, and networks and data. >> And so one of the findings obviously, you're pretty strong on this sayin' this is no long aspirational, it's realistic. What does the report show, what're the numbers, how did you break down the report? >> Sure. >> What are the categories, and what are some of the data? >> So the aspirational notion was that we kept talking about true private cloud, but, the hardware vendors were slow to actually deliver on it, especially on that service oriented approach as opposed to a product oriented approach. By that I mean product approach is, you buy it all upfront, and it's caviat after I'm a consumer, service oriented approach is you know we have enough belief in what we're selling that you're only paying for the services you consume, which is what AWS and Azure and others do. So we're seeing that actually happen. That's number one. You take a loot at what HPE's with a technology called GreenLake. IBM is advancing it's cause with software. Dell EMC is doing some interesting things with both VMware but also some related types of technologies. All of that is happening right now, so the server companies, or traditional server companies, are introducing true and honest to goodness capabilities that mimic the cloud, so that's happening. The second thing that's happening is you know the AWSs the Google Clouds, and the big hyper scalers, are also starting to introduce technology that allows at least elements of their platform to run on-premise. The big holdover was AWS, but now, through snowballs, through their their kind of ranked box, data box, you can now put a fair amount of processing on there, and a fair amount of AWS stuff, and you can actually run workloads down on this box. So it extends the AWS platform out to locations in a very novel way. So we're seeing on the one hand the server companies truly will introduce technology and services that actually do a better job of mimicking the cloud. We're seeing the cloud players come up with technologies that allow them to extend their footprint, their cloud presence, down to where data needs to reside, and that's where everybody's goin' right now, everybody's goin for that spot in the marketplace. >> So, you have categories here, on-premise-- >> We have on-premise, which is kind of the traditional true private cloud, and the leaders from a hardware packaging standpoint are Dell EMC, HPE are two of the big leaders. Then we have-- >> Cisco's right behind them. >> Cisco's right behind 'em. We've got what we call the near-premise, or the host of true private cloud, and this is where you have AWS right next to your private cloud box so that they can communicate really fast, or it's hosted. IBM is very big here, but there is a number of other players-- >> IBM's got a sizable lead, it's 12% by your numbers, and Rackspace coming second and four-- >> Rackspace is good. And then you've got some very interesting and very important smaller players, like Expedient for example. And then-- >> So there's two main categories, there's hosted, >> Correct. >> And then on-premise. >> On-premise. >> And then there's another category >> So near premise, and on-premise. >> Near premise and on-premise or hosted. >> And there's the ecosystem side, there's a software that's actually utilized to do this, this is where VMware excels in. >> Explain what the ecosystem, so you called true private cloud ecosystem pull through shares, what is that? >> So, we have, so, VMware as we've been talking about, is one of those technologies that allows one to devise a true private cloud platform. Increasingly that's what they're doing, with some of the technologies that we're talking about. And so ultimately they are putting the software out to customers and customers are defaulting to that software, as their approach to building that true private cloud, and then pulling hardware through as a second decision. So the first decision is I'm going to build my cloud, my private cloud, my true private cloud with VMware, and I'll find hardware that doesn't get in the way. >> So it's leaders who are pulling hardware sales. >> It's the software leaders that are putting the software for building true private clouds out there, and then through partnerships dragging hardware in. >> And so there, they're there and everyone wants to talk to them. So that's VMware (laughs) 24% >> That's VMware, Nutanix is moving along. >> HPE, Microsoft, IBM. >> HPE's in there. >> Interesting, that's awesome. And any other findings that you've found, in terms of growth? Number sizes I think this year you had 21 billion roughly 2017. >> Yeah, it's just over 20, it's 20.3 billion, it's going to go to, you know over 260 billion in 10 years, it's going to be bigger than the infrastructure as a service marketplace, it is the true private cloud segment, the on-premise segment for the first time exceeded the size of the near premise segment as the software matures, as you figure out how to make these business models go. But this is going to be, you know Diane Greene said something very very interesting at Google Next. And she said look, nobody really understands how this business is going to work in 10 years, and she's right. Some companies clearly have a better understanding than others. >> So do you think your numbers are short or over? >> I think-- >> But that implies you know. (laughs) >> Well no, I don't know if it's short or over, but let me give you an example. That our numbers presume a relatively constant approach in thinking about how we price and how we generate exchange for this stuff. But how fast the cloud operating model, that pay as you go moves into the true private space, is going to have an enormous implication on what those revenues look like. The degree to which companies demand a three year commitment like Salesforce is starting to do with SaaS. It's going to have an enormous implication on how those revenues actually get realized. >> Well, we've debated this, you and I have debated this before with Dave as well, Dave this it's a trillion, Dave Vellante, so, you know I think you're sure, I think you took a conservative approach, and you know just my personal observation. >> Well we think the overall cloud market's going to be, if we add SaaS in there, it's going to be 260 to 300, probably a total of 700 billion, something like that, and so it's pretty sizable. So we're just talking about that on-premise true private cloud. >> Yeah, the true private cloud you know, $250 billion by 2027. Okay, so I got to ask you a question, since, I like that Diane Greene quote by the way, just kidding you about the forecast numbers, but, I think she's right. So I got to ask you, what is your observation around what this report says vis-a-vis the buyer market out there who are squinting through the fud, and, all these rankings around who's got the most market share. We hear, you know there was a post on Forbes from my friend Bob Evans that said: oh, Microsoft's number one in cloud! So, how you define cloud is a function of how you define cloud. Someone defines it by bundling an office and apps and, eventually, the level of granularity is going to have to be at least segmented a bit. How do you view how customers should keep a score card for market share, leadership, and besides customers, and number of services, I mean is there an approach that anything coming out of this data you would see and saying maybe the market might want to be sized this way, maybe we should be thinking about not so much market share numbers on some graph on some analyst firm. Is there any thoughts on that? Because it's a big thing, and true private cloud's just one sector. >> Yeah, yeah. >> You've got SaaS, and you've got PaaS, and you've got-- >> So I think John, there've been at least, you know we could probably say there're more, but just making it up off the top of my head, there have been at least three eras that users focused on. Era number one is the hardware as the asset, how do we get the most out of our hardware. That dominated probably until the late '80s or so. And then it became the application as the asset, and then we bought into the application, and we bought hardware and all the other stuff underneath that application, and that was pretty much the 2000's, up until maybe 2010. And now we're thinking of data as the asset, and what does that mean? What it means is that ultimately, I think that the way that, we think that the way that architecture is going to be thought of, is not on application architecture, but around data architecture; I don't mean data architecture like a DBA, I mean what is your brand promise, what, what activities do you have to deliver that brand promise, what data and services do you need to perform those activities. Get that data in as close as you possibly can to those activities, wherever they have to be performed, so that you can perform them predictably, reliably, at the lowest cost, and in the greatest, shortest period of time. So I would start with the idea, you know what I'm going to focus on where my data's going to be located to run my business, that's where I would focus. The second thing, as I think when we think about market shares, and we think about a lot of these other questions, it's okay which, this is a transformative period of time, which of these companies is going to be most likely to deliver a product now, but also create better options for how I do stuff in the future; and we like to talk to our clients about the idea of buy the stuff that provides the best portfolio of options on future data value. And so, data today, and helping think about architecture, work with companies that are demonstrating that they're going to be able to create the options that you need in the future, 'cause this is going to change a lot over the next five, six, eight years. And so, you want to work with companies that are demonstrating that they're able to create new technology, through IP, through things like opensource, >> Okay so the question is-- >> Are sharing it appropriately too. >> So, who's number one? Again, I don't think this is going to be one score, I think it's going to be level of services, how many services you're using. There was one angle I wanted to do, but I can't, I'm still having a hard time. But I guess I'll ask ya, to put ya on the spot. If I'm a customer, Peter, who's the number one in cloud, gimme the top three players. >> AWS, Azure, Google. >> Okay, (claps once) there ya go. (laughs) The top three clouds. Well we're going to keep an eye on it-- >> Let's go to four though, so AWS, Azure, Google, and then again, from that true private cloud-- >> IBM. >> Because that's a, no, no, it's got to be Vmware; because that's, that's where the pull through is right now, right. But when you think about it, the big question is is AWS and Google Cloud going to come down to the edge, and down to the true private cloud as fast as some of these other cloud players are going to go up to the bigger cloud? If I were to pick the one that's most likely to win, it's located somewhere near ribbon. So Microsoft or... In Seattle area AWS. Again, again, it's so early, I think if people, going to have to figure out what to do, that's going to determine the winners and losers. Certainly a true private cloud report, great report. Check out the true private cloud report from Wikibon.com, go to wikibon.com and check it out, preview for VMworld. I'm John Furrier with Peter Burris, a lot of exciting news, two large sets, 72 interviews, three days, come visit theCUBE team, we got to full team down there, we're going to have a lot of our team down there lookin' to talk to you. Join our community, join our network, we're going to have a lot of fun, and also learn a lot at VMworld, talk to some really smart people. Thanks for watching. (intense orchestral music)

>> Narrator: Live from the Bill Graham Auditorium in San Francisco, it's theCUBE, covering Pure Storage Accelerate, 2018, brought to you by Pure Storage. >> Welcome back to theCUBE's coverage of Pure Storage Accelerate 2018. I'm Lisa Martin. Been here all day with Dave Vellante. We're joined by David Floyer now. Guys, really interesting, very informative day. We got to talk to a lot of puritans, but also a breadth of customers, from Mercedes Formula One, to Simpson Strong-Tie to UCLA's School of Medicine. Lot of impact that data is making in a diverse set of industries. Dave, you've been sitting here, with me, all day. What are some of the key takeaways that you have from today? >> Well, Pure's winning in the marketplace. I mean, Pure said, "We're not going to bump along. "We're going to go for it. "We're going to drive growth. "We don't care if we lose money, early on." They bet that the street would reward that model, it has. Kind of a little mini Amazon, version of Amazon model. Grow, grow, grow, worry about profits down the road. They're eking out a slight, little positive free cashflow, on a non-gap basis, so that's good. And they were first with All-Flash, really kind of early on. They kind of won that game. You heard David, today. The NVMe, the first with NVMe. No uplifts on pricing for NVMe. So everybody's going to follow that. They can do the Evergreen model. The can do these things and claim these things as we were first. Of course, we know, David Floyer, you were first to make the call, back in 2008, (laughs) on Flash and the All-Flash data center, but Pure was right there with you. So they're winning in that respect. Their ecosystem is growing. But, you know, storage companies never really have this massive ecosystem that follow them. They really have to do integration. So that's, that's a good thing. So, you know, we're watching growth, we're watching continued execution. It seems like they are betting that their product portfolio, their platform, can serve a lot of different workloads. And it's going to be interesting to see if they can get to two billion, the kind of, the next milestone. They hit a billion. Can they get to two billion with the existing sort of product portfolio and roadmap, or do they have to do M&A? >> David: You're right. >> That's one thing to watch. The other is, can Pure remain independent? David, you know well, we used to have this conversation, all the time, with the likes of David Scott, at 3PAR, and the guys at Compellent, Phil Soran and company. They weren't able, Frank Slootman at Data Domain, they weren't able to stay independent. They got taken out. They weren't pricey enough for the market not to buy them. They got bought out. You know, Pure, five billion dollar market cap, that's kind of rich for somebody to absorb. So it was kind of like NetApp. NetApp got too expensive to get acquired. So, can they achieve that next milestone, two billion. Can they get to five billion. The big difference-- >> Or is there any hiccup, on the way, which will-- >> Yeah, right, exactly. Well the other thing, too, is that, you know, NetApp's market was growing, pretty substantially, at the time, even though they got hit in the dot-com boom. The overall market for Pure isn't really growing. So they have to gain share in order to get to that two billion, three billion, five billion dollar mark. >> If you break the market into the flash and non flash, then they're in the much better half of the market. That one is still growing, from that perspective. >> Well, I kind of like to look at the service end piece of it. I mean, they use this term, by Gartner, today, the something, accelerated, it's a new Gartner term, in 2018-- >> Shared Accelerated Storage >> Shared Accelerated Storage. Gartner finally came up with a category that we called service end. I've been joking all day. Gartner has a better V.P. of naming than we do. (chuckles) We're looking' at service end. I mean, I started, first talking about it, in 2009, thanks to your guidance. But that chart that you have that shows the sort of service end, which is essentially Pure, right? It's the, it's not-- >> Yes. It's a little more software than Pure is. But Pure is an awful lot of software, yes. And showing it growing, at the expense of the other segments, you know. >> David: Particularly sad. >> Particularly sad. Very particularly sad. >> So they're really well positioned, from that standpoint. And, you know, the other thing, Lisa, that was really interesting, we heard from customers today, that they switched for simplicity. Okay, not a surprise. But they were relatively unhappy with some of their existing suppliers. >> Right. >> They got kind of crummy service from some of their existing suppliers. >> Right. >> Now these are, maybe, smaller companies. One customer called out SimpliVity, specifically. He said, "I loved 'em when they were an independent company, "now they're part of HPE, meh, "I don't get service like the way I used to." So, that's a sort of a warning sign and a concern. Maybe their, you know, HPE's prioritizing the bigger customers, maybe the more profitable customers, but that can come back to bite you. >> Lisa: Right. >> So Pure, the point is, Pure has the luxury of being able to lose money, service, like crazy, those customers that might not be as profitable, and grow from it's position of a smaller company, on up. >> Yeah, besides the Evergreen model and the simplicity being, resoundingly, drivers and benefits, that customers across, you know, from Formula One to medical schools, are having, you're right. The independence that Pure has currently is a selling factor for them. And it's also probably a big factor in retention. I mean, they've got a Net Promoter Score of over 83, which is extremely high. >> It's fantastic, isn't it? I think there would be VMI, that I know of, has even higher one, but it's a very, very high score. >> It's very high. They added 300 new customers, last quarter alone, bringing their global customer count to over 4800. And that was a resounding benefit that we were hearing. They, no matter how small, if it's Mercedes Formula One or the Department of Revenue in Mississippi, they all feel important. They feel like they're supported. And that's really key for driving something like a Net Promoter Score. >> Pure had definitely benefited from, it's taken share from EMC. It did early on with VMAX and Symmetrix and VNX. We've seen Dell EMC storage business, you know, decline. It probably has hit bottom, maybe it starts to grow again. When it starts to grow again, I think, even last quarter, it's growth, in dollars, was probably the size of Pure. (chuckles) You know, so, but Pure has definitely benefited from stealing share. The flip side of all this, is when you talk to you know, the CxOs, the big customers, they're doing these big digital transformations. They're not buying products, you know, they're buying transformations. They're buying sets of services. They're buying relationships, and big companies like Dell and IBM and HPE, who have large services arms, can vie for certain business that Pure, necessarily, can't. So, they've got the advantage of being smaller, nimbler, best of breed product, but they don't have this huge portfolio of capabilities that gives them a seat at the CxO table. And you saw that, today. Charlie Giancarlo, his talk, he's a techie. The guys here, Kicks, Hat, they're techies. They're hardcore storage guys. They love storage. It reminds me of the early days of EMC, you know, it's-- >> David: Or NetApp. Yeah. Yeah, or NetApp, right. They're really focused on that. So there's plenty of market for them, right now. But I wonder, David, if you could talk about, sort of architecturally, people used to criticize the two controller, you know, approach. It obviously seems to be doing very well. People take shots at their, the Evergreen model, saying "Oh, we can do that too." But, again, Pure was first. Architecturally, what's your assessment of Pure? >> So, the Evergreen, I think, is excellent. They've gone about that, well. I think, from a straighforward architecture, they kept it very simple. They made a couple of slightly, odd decisions. They went with their own NAND chips, putting them into their own stuff, which made them much smaller, much more compact, completely in charge of the storage stack. And that was a very important choice they made, and it's come out well for them. I have a feeling. My own view is that M.2 is actually going to be the form factor of the future, not the SSD. The Ssd just fitted into a hard disk slot. That was it's only benefit. So, when that comes along, and the NAND vendors want to increase the value that they get from these stacks, etc., I'm a little bit nervous about that. But, having said that, they can convert back. >> Yeah, I mean, that seems like something they could respond to, right? >> Yeah, absolutely. >> I was at the Micron financial analysts' meeting, this week. And a lot of people were expecting that, you know, the memory business has always been very cyclical, it's like the disk drive business. But, it looks like, because of the huge capital expenses required, it looks like supply, looks like they've got a good handle on supply. Micron made a good strong case to the street that, you know, the pricing is probably going to stay pretty favorable for them. So, I don't know what your thoughts are on that, but that could be a little bit of a head wind for some of the systems suppliers. >> I take that with a pinch of salt. They always want to have the market saying it's not going to go down. >> Of course, yeah. And then it crashes. (chuckles) >> The normal market place is, for any of that, is go through this series of S-curves, as you reach a certain point of volume, and 3D NAND has reached that point, that it will go down, inevitably, and then cue comes in,and then that there will go down, again, through that curve. So, I don't see the marketplace changes. I also think that there's plenty of room in the marketplace for enterprise, because the biggest majority of NAND production is for consumer, 80% goes to consumer. So there's plenty of space, in the marketplace, for enterprise to grow. >> But clearly, the prices have not come down as fast as expected because of supply constraints And the way in which companies like Pure have competed with spinning disks, go through excellent data reduction algorithms, right? >> Yes. >> So, at one point, you had predicted there would be a crossover between the cost per bit of flash and spinning disk. Has that crossover occurred, or-- >> Well, I added in the concept of sharing. >> Raw. >> Yeah, raw. But, added in the cost of sharing, the cost-benefit of sharing, and one of the things that really impresses me is their focus on sharing, which is to be able to share that data, for multiple workloads, in one place. And that's excellent technology, they have. And they're extending that from snapshots to cloud snaps, as well. >> Right. >> And I understand that benefit, but from a pure cost per bit standpoint, the crossover hasn't occurred? >> Oh no. No, they're never going to. I don't think they'll ever get to that. The second that happens, disks will just disappear, completely. >> Gosh, guys, I wish we had more time to wrap things up, but thanks, so much, Dave, for joining me all day-- >> Pleasure, Lisa. >> And sporting The Who to my Prince symbol. >> Awesome. >> David, thanks for joining us in the wrap. We appreciate you watching theCUBE, from Pure Storage Accelerate, 2018. I'm Lisa Martin, for Dave and David, thanks for watching.

>> Announcer: Live from the Bill Graham Auditorium in San Francisco, it's theCUBE covering Pure Storage Accelerate 2018, brought to you by Pure Storage. (bright music) >> Welcome to theCUBE. We are live at Pure Storage Accelerate 2018. I'm Lisa Martin also known as Prince for today with Dave Vellante. We're at the Bill Graham Civic Auditorium, really cool, unique venue. Dave, you've been following Pure for a long time. Today's May 23rd, they just announced FY19 Q1 earnings a couple days ago. Revenue up 40% year over year, added 300 new customers this last quarter including the Department of Energy, Paige.ai, bringing their customer tally now up to about 4800. We just came from the keynote. What are some of the things that you've observed over the last few years of following Pure that excite you about today? >> Well Lisa, Pure's always been a company that is trying to differentiate itself from the pack, the pack largely being EMC at the time. And what Pure talked about today, Matt Kixmoeller talked about, that in 2009, if you go back there, Fusion-io was all the rage, and they were going after the tip of the pyramid, and everybody saw flash, as he said, his words, as the tip of the pyramid. Now of course back then David Floyer in 2008 called that flash was going to change the world, that is was going to dominate. He'd forecast that flash was going to be cheaper than disk over the long term, and that is playing out in many market segments. So he was one of the few that didn't fall into that trap. But the point is that Pure has always said, "We're going to make flash cheaper than "or as cheap as spinning disk, "and we're going to drive performance, "and we're going to differentiate from the market, "and we're going to be first." And you heard that today with this company. This company is accelerated to a billion dollars, the first company to hit a billion dollars since NetApp. Eight years ago I questioned if any company would do that. If you look at the companies that exited the storage market, that entered and exited the storage market that supposedly hit escape velocity, 10 years ago it was 3PAR hit $250 million. Isilon, Data Domain, Compellent, these companies sold for between $1 and $2.5 billion. None of them hit a billion dollars. Pure is the first to do that. Nutanix, which is really not a storage company, they're hyper-converged infrastructure, they got networking and compute, sort of, hit a billion, but Pure is the the first pure play, no pun intended, storage company to do that. They've got a $5 billion evaluation. They're growing, as you said, at 40% a year. They just announced their earnings they beat. But the street reacted poorly because it interpreted their guidance as lower. Now Pure will say that we know we raised (laughs) our guidance, but they're lowering the guidance in terms of growth rates. So that freaks the street out. I personally think it's pure conservativism and I think that they'll continue to beat those expectations so the stock's going to take a hit. They say, "Okay, if you want to guide lower growth, "you're going to take the hit," and I think that's smart play by Pure because if and when they beat they'll get that updraft. But so that's what you saw today. They're finally free cash flow positive. They've got about a billion dollars in cash on the balance sheet. Now half a billion of that was from a convertible note that they just did, so it's really not coming from a ton of free cash flow, but they've hit that milestone. Now the last point I want to make, Lisa, and we talked about this, is Pure Storage at growing at 40% a year, it's like Amazon can grow even though they make small profit. The stock price keeps going up. Pure has experienced that. You're certainly seeing that with companies like Workday, certainly Salesforce and its ascendancy, ServiceNow and its ascendancy. These companies are all about growth. The street is rewarding growth. Very hard for a company like IBM or HPE or EMC when it was public, when they're not growing to actually have the stock price continue to rise even though they're throwing off way more cash than a company like Pure. >> Also today we saw for the first time the new CEO's been Charlie Giancarlo, been the CEO since August of 2017, sort of did a little introduction to himself, and they talked about going all in on shared accelerated storage, this category that Gartner's created. Big, big focus there. >> Yeah, so it's interesting. When I look at so-called shared accelerated storage it's 2018, Gartner finally came up with a new category. Again, I got to give credit to the Wikibon guys. I think David Floyer in 2009 created the category. He called it Server SAN. You don't know if that's David, but I think maybe shared accelerated storage's a better name. Maybe Gartner has a better V.P. of Naming than they do at Wikibon, but he forecast this notion of Server SAN which really it's not DAS, it's not SAN, it's this new class of accelerated storage that's flash-based, that's NVMe-based, eliminates the horrible storage stack. It's exactly what Pure was talking about. Again, Floyer forecast that in 2009, and if you look at the charts that he produced back then it looks like you see the market like this going shoom, the existing market and the new market just exploding. So Pure, I think, is right on. They're targeting that wide market. Now what they announced today is this notion of their flash array for all workloads, bringing NVMe to virtually their entire portfolio. So they're aiming their platform at the big market. Remember, Pure's ascendancy to a billion really came at the expense of EMC's VMAX and VNX business. They aimed at that and they hit it hard. They positioned flash relative to EMC's either spinning disk or flash-based systems as better, easier, cheaper, et cetera, et cetera, and they won that battle even though they were small. Pure's a billion, EMC at the time was $23, $24 billion, but they gained share very rapidly when you see the numbers. So what they're doing is basically staking a claim, Lisa, saying, "We can point our platform "at the entire $30, $40, $50 billion storage TAM," and their intention, we're going to ask Charlie Giancarlo and company, their aspiration is to really continue to gain share in that marketplace and grow significantly faster than the overall market. >> So they also talked about the data-centric architecture today and gave some great examples of customers. I loved the Domino's Pizza example that they talked about, I think he was here last year, and how they're actually using AI at Domino's to analyze the phone calls using this AI engine to identify accurate order information and get you your pizza as quickly as you want. So not only do we have pizza but we were showered with confetti. Lot of momentum there. What is your opinion of Pure, what they're doing to enable companies to utilize and maximize AI-based applications with this data-centric architecture? >> So Pure started in the what's called block storage, really going after the high-volume, the transaction OLTP business. In the early days of Pure you'd see them at Oracle OpenWorld. That's where the high-volume transactions are taking place. They were the first really, by my recollection, to do file-based flash storage. Back in the day it was you would buy EMC for a block, you'd buy NetApp for file. What Pure did is said, "Okay, let's go after "the biggest market player, EMC, "which we'll gain share there in block, "and then now let's go after NetApp space and file." They were again the first to do that. And now they're extending that to AI. Now AI is a small but growing market, so they want to be the infrastructure for artificial intelligence and machine intelligence. They've struck a partnership with Nvidia, they're using the example of Domino's. It's clearly not a majority of their business today, but they're doing some clever things in marketing, getting ahead of the game. This is Pure's game. Be first, get out in the lead, market it hard, and then let everybody else look like they're following which essentially they are and then claim leadership position. So they are able to punch above their weight class by doing that, and that's what you're seeing with the Domino's example. >> You think they're setting the bar? >> Do I think they're setting the bar? Yeah, in many respects they are because they are forcing these larger incumbents to respond and react because they're in virtually all accounts now. The IT practitioners, they look at the Gartner Magic Quadrant, who's in the upper right, I got to call them in for the RFP. They get a seat at that table. I would say it was interesting hearing Charlie speak today and the rest of the executives. These guys are hardcore storage geeks, and I mean that with all due respect. They love storage. It kind of reminds me of the early days of EMC. They are into this stuff. Their messaging is really toward that storage practitioner, that administrator. They're below the line but those are the guys that are actually making the decisions and affecting transactions. They're touching above the line with AI messages and data growth and things like that, but it's really not a hardcore CIO, CFO, CEO message yet. I think that will come later. They see a big enough market selling to those IT practitioners. So I think they are setting the bar in that IT space, I do. >> One of the things I thought that they did well is kind of position the power of data where, you know people talk about data as fuel. Data's really a business catalyst that needs to be analyzed across multiple areas of a business simultaneously to really be able to extract value. They talked about the gold rush, oh gee, of 1849 and now kind of in this new gold rush enabling IT with the tools. And interestingly they also talked about a survey that they did with the SEE Suite who really believe that analyzing data is going to be key to driving businesses forward, identifying new business models, new products, new services. Conversely, IT concern do we have the right tools to actually be able to evaluate all of these data to extract the value from it? Because if you can't extract the value from the data, is it, it's not useful. >> Yeah, and I think again, I mean to, we give Pure great marketing, and a lot of what they're doing, (laughs) it's technology, it's off-the-shelf technology, it's open source components. So what's their differentiation? Their differentiation is clearly their software. Pure has done a great job of simplifying the experience for the customer, no question, much in the same way that 3PAR did 10 or 15 years ago. They've clearly set the bar on simplicity, so check. The other piece that they've done really well is marketing, and marketing is how companies differentiate (laughs) today. There's no question about it that they've done a great job of that. Now having said that I don't think, Lisa, that storage, I think storage is going to be table stakes for AI. Storage infrastructure for AI is going to have to be there, and they talked about the gold rush of 1849. The guys who made all the money were the guys with the picks and the axes and the shovels supplying them, and that's really what Pure Storage is. They're a infrastructure company. They're providing the pickaxes and the shovels and the basic tools to build on top of that AI infrastructure. But the real challenges of AI are where do I apply and how do I infuse it into applications, how do I get ROI, and then how do I actually have a data model where I can apply machine intelligence and how do I get the skillsets applied to that data? So is Pure playing a fundamental catalyst to that? Yes, in the sense that I need good, fast, reliable, simple-to-use storage so that I don't have to waste a bunch of time provisioning LUNs and doing all kinds of heavy lifting that's nondifferentiated. But I do see that as table stakes in the AI game, but that's the game that Pure has to play. They are an infrastructure company. They're not shy about it, and it's a great business for them because it's a huge market where they're gaining share. >> Partners are also key for them. There's a global partner summit going on. We're going to be speaking, you mentioned Nvidia. We're going to be talking with them. They also announced the AIRI Mini today. I got to get a look at that box. It looks pretty blinged out. (laughing) So we're going to be having conversations with partners from Nvidia, from Cisco as well, and they have a really diverse customer base. We've got Mercedes-AMG Petronas Motorsport Formula One, we've got UCLA on the CIO of UCLA Medicine. So that diversity is really interesting to see how data is being, value, rather, from data is being extracted and applied to solve so many different challenges whether it's hitting a race car around a track at 200 kilometers an hour to being able to extract value out of data to advance health care. They talked about Paige.ai, a new customer that they added in Q1 of FY19 who was able to take analog cancer pathology looking at slides and digitize that to advance cancer research. So a really cool kind of variety of use cases we're going to see on this show today. >> Yeah, I think, so a couple thoughts there. One is this, again I keep coming back to Pure's marketing. When you talk to customers, they cite, as I said before, the simplicity. Pure's also done a really clever thing and not a trivial thing with regard to their Evergreen model. So what that means is you can add capacity and upgrade your software and move to the next generation nondisruptively. Why is this a big deal? For decades you would have to actually shut down the storage array, have planned downtime to do an upgrade. It was a disaster for the business. Oftentimes it turned into a disaster because you couldn't really test or if you didn't test properly and then you tried to go live you would actually lose application availability or worse, you'd lose data. So Pure solved that problem with its Evergreen model and its software capability. So its simplicity, the Evergreen model. Now the reality is typically you don't have to bring in new controllers but you probably should to upgrade the power, so there are some nuances there. If you're mixing and matching different types of devices in terms of protocols there's not really tiering, so there's some nuances there. But again it's both great marketing and it simplifies the customer experience to know that I can go back to serial number 00001 and actually have an Evergreen upgrade is very compelling for customers. And again Pure was one of the first if not the first to put that stake in the ground. Here's how I know it's working, because their competitors all complain about it. When the competitors are complaining, "Wow, Pure Storage, they're just doing X, Y, and Z, "and we can do that too," and it's like, "Hey, look at me, look at me! "I do that too!" And Pure tends to get out in front so that they can point and say, "That's everybody following us, we're the leader." And that resonates with customers. >> It does, in fact. And before we wrap things up here a lot of the customer use cases that I read in prepping for this show all talked about this simplicity, how it simplified the portability, the Evergreen model, to make things much easier to eliminate downtime so that the business can keep running as expected. So we have a variety of use cases, a variety of Puritans on the program today as well as partners who are going to be probably articulating that value. >> You know what, I really didn't address the partner issue. Again, having a platform that's API-friendly, that's simple makes it easier to bring in partners, to integrate into new environments. We heard today about integration with Red Hat. I think they took AIRI. I think Cisco's a part of that partnership. Obviously the Nvidia stuff which was kind of rushed together at the last minute and had got it in before the big Nvidia customer show, but they, again, they were the first. Really made competitors mad. "Oh, we can do that too, it's no big deal." Well, it is a big deal from the standpoint of Pure was first, right? There's value in being first and from a standpoint of brand and mindshare. And if it's easier for you to integrate with partners like Cisco and other go-to-market partners like the backup guys you see, Cohesity and Veeam and guys like Catalogic are here. If it's easier to integrate you're going to have more integration partners and the go-to-market is going to be more facile, and that's where a lot of the friction is today, especially in the channel. >> The last thing I'll end with is we got a rain of confetti on us during the main general session today. The culture of Pure is one that is pervasive. You feel it when you walk into a Pure event. The Puritans are very proud of what they've done, of how they're enabling so many, 4800+ customers globally, to really transform their businesses. And that's one of the things that I think is cool about this event, is not just the plethora of orange everywhere but the value and the pride in the value of what they're delivering to their customers. >> Yeah, I think you're right. It is orange everywhere, they're fun. It's a fun company, and as I say they're alpha geeks when it comes to storage. And they love to be first. They're in your face. The confetti came down and the big firecracker boom when they announced that NVMe was going to be available across the board for zero incremental cost. Normally you would expect it to be a 15 to 20% premium. Again, a first that Pure Storage is laying down the gauntlet. They're setting the bar and saying hey guys, we're going to "give" this value away. You're going to have to respond. Everybody will respond. Again, this is great marketing by Pure because they're >> Shock and awe. going to do it and everybody's going to follow suit and they're going to say, "See, we were first. "Everybody's following, we're the leader. "Buy from us," very smart. >> There's that buy. Another first, this is the first time I have actually been given an outfit to wear by a vendor. I'm the symbol of Prince today. I won't reveal who you are underneath that Superman... >> Okay. >> Exterior. Stick around, you won't want to miss the reveal of the concert tee that Dave is wearing. >> Dave: Very apropos of course for Bill Graham auditorium. >> Exactly, we both said it was very hard to choose which we got a list of to pick from and it was very hard to choose, but I'm happy to represent Prince today. So stick around, Dave and I are going to be here all day talking with Puritans from Charlie Giancarlo, David Hatfield. We've also got partners from Cisco, from Nvidia, and a whole bunch of great customer stories. We're going to be right back with our first guest from the Mercedes-AMG Petronas Motorsport F1 team. I'm Lisa "Prince" Martin, Dave Vellante. We'll be here all day, Pure Storage Accelerate. (bright music)

>> Narrator: Live from Chicago, Illinois, it's the CUBE, covering Veeamon 2018. Brought to you by Veeam. >> Welcome to the Windy City, everybody, you're watching the CUBE, the leader in live tech coverage. My name is Dave Vellante. I'm here with my co-host, Stuart Miniman. Stu, this is our second year of covering Veeamon. Although we have covered Veeam as a company since the early days of its ascendancy into the virtualization space, really focused on as a VMware specialist, virtualization only, now expanding dramatically into the enterprise. This is a company that has grown from very small to quite large, it's going to be probably close to a billion dollars in bookings this year, growing at 30 plus percent each year. A company that is moving beyond just the small business into the core of the enterprise with new executives, new messaging, renewed partnerships that seems to be really gaining traction. Veeam is a backup and data protection specialist that's now trying to rebrand itself as an always on, for the digital world, hyperavailability, intelligent data management, multi-cloud environment, throw in a few more buzzwords, Stu. And they're punching above their weight, as they always have, and it's a playbook that Veeam has used very, very successfully. Combine that with the branding, green everywhere. They've taken over Chicago. Veeam is famous for its parties, parties at VMworld, and other big events, like HPE Discover. And this is, I don't know, the fifth, sixth Veeamon that they've had, and we've got how many people here, Stu? >> 2,200. >> 2,200. So, what's your take? You saw the keynotes this morning, you were in the private analyst sessions today. Give us your analysis of Veeam. >> Yeah, Dave, you know, first of all, they did what most of the big companies do. They started off with a partner day. Veeam's all about their partners. Last year, you and I documented what they talked about is they were transitioning from the 10 years of virtualization to the next big wave, which is cloud. Doesn't mean that virtualization goes away, there's lots that they're doing in the multi-hypervisor world, but multi-hypervisor, multi-cloud, it's any data, any app, any cloud is the message. And Peter McKay started out, Dave, you know, big hero numbers for the company. As you said, they've had over double-digit growth, for now, it's 39 quarters, hugely impressive. 827 million in 2017 booking. The goal absolutely is to be over one billion dollars this year. For me, the number that jumped out, really, is they have 300,000 customers. You and I were talking to Ratmir a little bit and said, okay, you know, VMware has 500 thousand, he's like, well, 550 thousand customers and Veeam's in about 270 thousand of those, so about half of all VMware customers are in there, that Veeam is in there, but they have lots of headroom for growth in those VMware environments. As you've heard Veeam today over and over, the growth opportunity for them is the enterprise. So while they're in a lot of the Fortune 100 and Fortune 1000 accounts, they haven't penetrated them nearly as deeply as, say, a VMware has. But when you look at 300,000 customers, Dave, they're adding 133 customers a day. That's about 10,000 a quarter. 133 a day, 10,000 a quarter. Say, compare and contrast against another Veeam partner, Nutanix. Nutanix is adding about 1,000 customers a quarter, which is great for Nutanix, for their market, but as a software company in the cloud world, Veeam can stack themselves up against, again, some of the largest software companies in the world. And they put out the plan in place, is how they're going to get not only over a billion, but get to, like, that five billion dollar mark, which is some really rarefied air. >> So, let's stay on that for a second. Two themes I want to cover. First, the customers. 300,000 customers, 90% are in a virtualized and using VMware, that was the roots of this company. But there's 500,000, 550,000, I think now, VMware customers, so there's some opportunity there. We're going to talk to Ratmir Timashev, the founder. He was sharing with us before that their mantra earlier on was no physical, just virtual, just virtual. Well, last year, they announced physical. They're expanding, that's a TAM expansion move. Their TAM is much, much bigger than just a couple of billion dollars in pure backup. It's in the 20, 30 billion dollar range now. So that leads me to the second point, which is Veeam is an enterprise software, Veeam's a pure software company, first of all. So they are beginning to reach that rarefied air of a billion dollar plus companies. Obviously, Oracle, SAP, Salesforce, you know, are there. But others have recently cracked the billion: ServiceNow, Workday, companies like that. RedHat, obviously, is another one that's blown through that billion dollar figure, doing very, very well. Some would argue that Nutanix is a software company, could even argue, sort of stretching it now, Pure is a software company, a lot of software innovation. But Veeam, there's no argument, they are a pure software company. The number of billion-dollar software companies is few and far between, Veeam is about to crack that magic number, which is not trivial. >> Yeah, and Dave, we've talked about going beyond virtualization and cloud. Last year, one of the big discussion points was they bought N2WS, which is really how they get backup into AWS. And they've got large growth, 153 growth year over year. Other one, Microsoft, big partner of theirs, both for virtualization, something that kind of sent a ripple through the whole virtualization industry, when Veeam got off of only VMware and added hyper-v support. Well, Azure, they've got over 2,500 downloads of their Azure solution, so showing growth there. Also, supporting IBM Cloud, working with a lot of service providers. The breadth of what they're offering, in expanding beyond just the virtualization, admin, and some simple tools, where Veeam had really cut their teeth. Because, Dave, that core business, there's a lot of competitors there now, and Veeam's trying to make sure that they fight off the competition and stay ahead in this multi-cloud world. >> So much to talk about, I want to talk about the competition, but before we get there, one of the critical factors for a company like Veeam, trying to attract enterprise customers, Veeam's a company who's known for their SMB heritage. And so, partnerships, crucial. Just some of the partnerships that they've signed and emphasized over the last year and a half, two years: HPE, my sources tell me, we heard Bill Philbin up on stage this morning, he had a keynote, my sources tell me that it's many, many tens of millions of dollars, so this is on its way to 100 million dollar partnership. IBM, you mentioned IBM Cloud, Microsoft, the Azure stuff, Pure Storage, Nutanix, VMware, obviously, has always been a partner. NetApp, Cisco, we heard up on stage today. So expanding the partner ecosystem. Stu, explain why that's so important. >> Yeah, so first of all, Dave, so many places, how does Veeam go to market? One of the more interesting things, if you talk about the sales motion, is HP and Cisco now have Veeam in their price book. So Veeam, great channel, customers that love them, over 300,000, but when you take the Cisco sales force and the HPE sales force, and say you guys can make money on this, that really hypercharges what they're doing. It was always nice that they partnered with VMware, but how do you get deeper into those environments? I know you want to touch on the competition, we'll make sure we cover, there's some critical hires that they've also had in recent times, but what's your take on the competition? >> Yeah, that's just what I'm talking about. Before we get to competition, I do want to talk about, >> Oh, partners. >> Talent, but I just want to mention HPE, the reason why HPE, to me, is so interesting is because when they sold their software business to Micro Focus, they jettisoned the old HP Data Protect, or HP Protect software business. That opened up a huge opportunity and vacuum for Veeam to slide in. They were very aggressive with regard to partnering with HPE, smart move by Veeam, and I think, smart move by HPE, even though it's more of a reseller slash partnership agreement. Talent. This company's been able to attract talent. It started with Peter McKay, who was brought in to top-level the messaging and the executive team. He's brought in a number of folks, in sales and marketing, the new CMO is on as well. They've attracted a few, one in particular, analysts. So one of the kerfuffles before this show was Gartner announced that two of its analysts were leaving to go to Rubrik. Well, over the weekend, when this announcement came out, Veeam executives saw that. One of them was Dave Russell, who we've had in the CUBE before, very sharp guy, very well known, respected. Veeam jumped on him on that weekend and said, no, you know us better than you know Rubrik, you got to come work for us, and so they stole Dave Russell away. We saw Dave Russell on stage today. He left Rubrik at the altar, which, you know, I'd rather see that than him going to work for Rubrik, for four or five months. But what do you make of that? >> Yeah, so Dave, we've seen a lot of jumps recently, from the analyst side. It's interesting, Jason Buffington, who we'd have on the CUBE many times, is also here at Veeam, so hot space. I know last year at VMworld, we said this whole backup, secondary storage market is one of the hottest areas. There's a lot of money, there's a lot of growth. And what's the analyst's job? It's to really understand some of these trends here. So, some of 'em, it's something that they're passion on, they called Dave Russell the Godfather of backups. So, he said he wanted to be a builder, he wanted to get in, heck, even a good friend of mine just announced he's joining Veeam, Mark Toomey, who was from the EMC side, worked on the backup stuff, real strong technologist, was one of the early bloggers, really knows his stuff, and based in Ireland. Veeam's doing a real good job of attracting talent. Peter McKay's learning from his patriots, as to how to bring in good talent. >> And we'll have him on to talk to you about that. As a lead-in to the competitive discussion, I want to give some analysis that we got from Peter Burris and David Floyer from the Wikibon team. They gave me a few points leading up to this conference that I want to share with our audience. Number one is data protection and orchestration are moving up the list on the level of CXO concerns. So we're seeing that very clearly in our research. The second point, this company talks a lot about the future, and automation as being part of that. There's a dichotomy between the business and IT, in terms of the expectations to the degrees of automation that exist. The business assumes there's a lot more automation than there actually is, so when you see executives up on stage, talking about this automated world, the expectations in the business are everything's going to be automated. It's not that simple yet today. That causes some friction, potentially, in the customer base. Means there's lots of room for churn, that's good news for a company like Veeam, who's both an incumbent but a disruptor moving upmarket. The global 2000, according to David Floyer, is leaving billions of dollars on the table, in terms of lost revenue, because they have inadequate data protection. If you look over a three or four year period, companies are losing money because of inadequate, bolted-on data protection strategies. The last point is all these vendors are vying for position. It's unclear who's going to win this game. You've got no dominant player. You've got the backup and recovery vendors, the storage companies like Dell and EMC, you got security companies that are in there, you got startups, like Rubrik and Cohesity, you got Veeam, who's an established, they're like a hybrid, both established and startup. So you've got this competitive dynamic, which is really, really interesting. I want to flip it over to you. Last year at VMworld, backup and recovery, data protection was one of the hottest areas of topics of conversation, and on the floor, one of the most trafficked by customers. What's your take on that? >> Well, Dave, you know, core to our research, we've been talking about for, I can't even tell you now how long, data is at the center of it all. How do I not, it's not storing data, it's getting value from my data, it's unlocking data. It's not about big data, it's not about some cool new tooling that we have there, and what we've really found is if I've got good replicas, if I've got strong backup, I can actually leverage my data more, get more value out of it, that's critical to what we're talking about here, Dave. Which is why Veeam and others like them can get this, is simplicity, is something we hear over and over, the early days of VMware, that was why customer loved VMware. And Veeam followed that trend a lot. It's really tough to be simple. That was that whole hyperconverge wave, was supposed to be simple. Cloud is not simple today. It's multi-cloud, there's a lot of challenges there. So Veeam, their customers love 'em, the proof is in the numbers that they're putting in. >> I think that's great analysis. Let's close on that. The challenge, I think, for Veeam, like some of the incumbents that you saw, Veritas, IBM, when VMware's ascendancy occurred, Veeam stepped in and really disrupted and won that battle. Now, the others hung on. They hung on to their install base, but they're hanging on for dear life. You've seeing IBM now retooling its portfolio, Dell EMC retooling its backup portfolio, Veritas retooling its backup portfolio, so it's jump ball in that respect. Veeam's got to demonstrate that it can move from that virtualization specialist, small business specialist, up into the enterprise, resonate with the CXOs, and compete for its fair share. So we'll be watching that, we'll be covering that all week. This is Dave Vellante with Stu Miniman. You're watching the CUBE, live from Chicago, Veeamon 2018.

>> Narrator: Live from Las Vegas, it's theCUBE, covering Dell Technologies World 2018. Brought to you by Dell EMC and its ecosystem partners. >> Welcome back to Dell Technologies World. This is Dave Vellante with Stu Miniman, and you're watching theCUBE, the leader in live tech coverage. We go out to the events, we extract the signal from the noise, break it all down. Stu, this is our ninth year at Dell, EMC, Dell EMC, Dell Technologies World. >> Yeah, I mean Dave, and Old EMC World was one of the first places I met you. I think it was like 2008 or something like that. There was like a little blogger lounge. >> Yeah, this is 15 for you, I think it's 11 or 12 for me. >> Stu: Yeah. >> So it's been quite a run. I mean you remember the early days of this event. It was really a technical show. And I think that's probably why it's had such staying power. Because the roots are embedded in technology, but wow what a long way we've come. >> Yeah, I mean, first of all, Dave, theCUBE, oh my god, I can't believe, double set here. We were looking at photos of us shoved in the corner with horrible lighting and no good cameras, and we've got a massive crew here. You're always looking sharp as usual, Dave. >> Thank you Stu. (laughing) >> Yeah, I mean gosh, that first year, I was wearing a vendor polo. (laughing) No hoodies back then. I wear a hoodie some now. But it's interesting for me, especially, since I spent 10 years working at EMC. I've been at Dell World for four or five years, kind of the mash up of those two is the biggest tech merger we've been covering since it was announced. This show has a lot of Dell overtones. So you and I have been that, Dell World was originally that CIO event. You had people like Bill Clinton and Elon Musk up onstage here. At this show we've got people like Walter Isaacson up onstage, I love reading his books, listen to the podcast. >> Dave: Andy McAfee. >> Andy McAfee, who you and I have interviewed a few times, talking about the second machine age, so some of those kind of high-level business issues as opposed to the deep in the portfolio, Dave Donatelli upstage walking through 37 different product announcements. >> So back then did you have hair or was this... >> Yeah, come on Dave, I was, when I started at EMC I was 7 foot tall and had hair. You know, the years of tech beat me down. >> So let's look at this merger, Stu. We go back, we've said, you and I have talked about this a lot. It was inevitable. You had Amazon coming in hard, driving margins of the enterprise down. Something had to happen to HPE, something had to happen to EMC, these infrastructure companies, and we said at the time that what we were going to see is 19% gross margin company married to the 16% gross margins company, come somewhere together in the low 30s gross margin. That's exactly what we've seen. The thing that's a little bit surprising to me is we've seen growth out of Dell. I've seen a lot of growth out of many enterprise infrastructure companies that are large and incumbents. Obviously people like Pure Storage grow very quickly. But at the time the merger we pinned them at slow 70s and they're now $80 billion, and we want to break that down a little bit. But did the growth surprise you? Particularly the client side grew. And the storage side declined multiplicitously. >> Dave, as you've been breaking down and I've been watching you, half of their business is the client side, and when they call out 21 consecutive quarters of growth, well if half the business has grown, that's good. And VMWare, doing well. We just interviewed Pac Elsinger. You know, VMWare's clicking well, integrating with the cloud. There's a lot of change there. Just one quick thing, talk about EMC. For me, one of the saving graces for EMC is they never bought a large services organization. You know, back in the day it was like, oh they were going to buy Accenture. There were some of these things. You look at the companies that have 100,000 services people, they're having to trim down, they're having to spin things out. You know the Dell spin merge, is Dell did spin off per row. So, while there have been some consolidation and some reductions since Dell and EMC have come together, you know, overall they're growing, there's good, there's new areas that they're putting R and D together. >> Just to give our audiences a little sort of overview in case you're not that familiar with what Dell has become, Dell Technologies, I mean, essentially you're looking at an $80 billion business. The core client side and infrastructure of the enterprise side comprised about 69 billion. VMWare's almost 8 billion, and then other, you know RSA, and well, whatever was back then pivotal before the IPO, etc., you know, Dell Financial, etc., was about 3 billion. That gets you to 80 billion. As you said, the client side is about half of the business. It's growing very nicely at about 7% a year, and it's about five and a half, 5.6% operating income. The ISG business, which is the core of, the classic EMC, all the server stuff, all the networking stuff. It's about, let's see 30.7 billion, almost 31 billion. The servers and networking side are growing at 20% a year. The storage is declining quite significantly. Double digits, they're sort of moderating that decline. And it's a higher percentage operating income, as percentage of revenue about 7%. You'd like to see that significantly higher. Now you go to VMWare, right? VMWare is 10% of the company's revenue but it accounts for half of the company's operating cash flow because it's margins, operating margins, are way up, high 20s, low 30s-- >> Yeah, I mean Dave, it was, I remember VM World, I think it was two years ago, I went to Michael, I'm like, "Michael, people think you're going to sell that off." And he was just foaming at the mouth. He's like, "They're stupid, they don't understand math." >> Dave: Well why would he? >> You know VMWare absolutely-- >> I mean, there's a 35% operating margin business, I mean it's a fantastic business. >> Dave, to be honest, everybody watching, is VMWare went through a little bit of a downturn. You know, the show two years ago wasn't great. >> Dave: Okay, right. >> But you know, NSX is now cooking, vSAN's doing great. There's lots of good areas that they have there. And the cloud picture. I mean turn back three years ago, Dave, VMWare was making statements like, when the old bookseller wins we're losing. EMC on their side was kind of trying to play a little bit with public cloud, but it was well understood in the field, public cloud is your enemy. And the market has matured. It understood that companies are figuring out their cloud strategy and their application and data strategy. And it's not a winner take all, zero sum game, everything goes to one of the top three or four public cloud players. >> So I got to ask you, so you feel as though that's sustainable, right? 'Cause I got to say, if I were AWS I would be looking at this saying this awesome. I need to get into the enterprise. I got to deal with the number one enterprise infrastructure player in VMWare in terms of its brand and its presence. I mean half a million customers, I think, is the number. I'm very excited. The flip side of that is the reality is, that deal for VMWare has been a huge tailwind for them. So help us square that circle. >> Yeah, and Dave, it's nuanced and complicated. Because when I talk to service providers, when I talk to the channel partners here with VMWare and with Dell, they're all starting to work more and more with VMWare. So you know, short-term, next two to three years, I think there's a great tailwind for VMWare to get involved here, but my concern is long term that people get on Amazon and they say, this is great and look at all these services and all of these things, maybe I don't need to pay for my server virtualization anymore. Maybe I don't need some of those pieces. What do I need in my data to center, sure I'll continue, but it's slowly declining like you mentioned. Storage is on a bit of a decline overall. So it's death by 1000 cuts. It is that replacement. For me it's always watching that data and that applications. It is tough, like super tough. David Floyer always say migrations, don't do 'em. You're going to go through so much pain, especially things like database migrations. But it is something that's happening. It's going to take the next five to 10 years as we look at these shifts. People are building new apps all the time. That tends to favor the public clouds, and there's so much happening in that space, but you know, the whole Dell family including Pivotal and VMWare, Virtustream, RSA, there are places where they win and still do well because, remember of course, none of these companies, it's not like they have 75% market share. So you know, if you ask Michael Dell, number one thing is he wants to take market share from HPE, and if he continues to take some of their market share it can help offset some of the things that he's losing to the public cloud. >> And well you have to take market share in a market that's not growing that fast. But you know, as we say on theCUBE many times, these disruptions are not binary, right? We still have mainframes for example. In fact, they're helping their tailwind for IBM right now. So you can put forth a scenario where yeah, a lot of these cloud native apps are going to be built in AWS and a lot of VMWare customers are going to do that, but as we often say, organizations can't just take their data and stuff it into the cloud, the public cloud, right? They've got to bring the cloud operating model to their data, to their business. We ask Pat, is it just use case specific, the Amazon Cloud and IBM I guess as well, or is it really bringing that cloud experience. And you know, he definitively said it's both, and I presume you buy that? >> Yeah, and I mean, Dave I listened to Michael DEll's keynote, and he said their goal is to integrate from the edge to the multi-cloud world. There's things that I want to understand this week. You know, I talked to some of my, you know, the real pellor heads here, that do really advanced type of technology. There are sessions here on containers. There's probably people talking about serverless here at the show. So they're looking at those next generation things, especially the VMWare side of the house is there. At the edge, you and I got to hear really the IoT strategy that Dell laid out towards the end of last year. Edge, absolutely huge opportunity, and there is no clear leader today because it's very early here, so how real are some of these opportunities to really expand beyond the traditional market because look, Dell's doing great in servers, that's the core of their business. It's the main driver for a lot of it, and you know, as Michael's happy to say, he said, "You know, hey, the PCs "and laptops are still doing well "two decades after IBM called it the post PC world." >> Thank goodness for client side. I mean that has been the savior here. What do you think, I mean you were at EMC for a number of years. What do you think happened to the storage side? That was a surprise to me because EMC is very rarely, if ever, a lost share in storage. They've either held share or bumped it up, doing acquisitions and so forth. But you had kind of Tucci with his hand at the wheel, doing tuck-in acquisitions, really focused on maintaining that share. Do you think it was just the disruption of the merger? Was it just inevitable that you had just the storage business getting too long in the tooth? What happened? >> Yeah, I mean, Dave, and there are so many things. Everything from the quarter shifted. So you know, it was going to take the end of quarter, which EMC always had a huge hockey stick on, shifted by a month. So some of it it was just financial where it landed up in the quarter, some of the big shifts that are happening in the market. EMC was very early on flash and did well in it, and they've got the VMAX and they've got the XtremeIO, and they're doing well there, but there's lots of competition there. Hyperconverge, once again, Dell and EMC doing great there. But there are some of these macroshifts and clouds eating away at it. So I don't have a single answer. There's so many different pieces. You know, storage has always been a knife fight. One of the things I want to understand this week, Dave, is the old EMC, well, we're going to have nine or 17 different products, and they'll all overlap. You wonder if Dell is, I really expect that Michael Dell, Jeff Clarke are going to streamline that portfolio. Profitability, make sure that they're getting the market share that they need because the old model might have worked in a growing market, but in a flat to slightly negative market it's not going to make much sense. >> And you already said that, I mean you made the point, Michael's keynote, the keynotes generally this morning, no question had Michael's fingerprint on them. That's much more like a Dell World than a traditional EMC World. We had Jeremy and Jonathan coming out on motorcycles and all kinds of crazy stuff. You know, much more staid. I think conservative, sending a message of steady. We're here for you to support your digital transformation. We are your infrastructure partner, so I mean, I think it's clear who's running the company. Alright, Stu, well, looking forward to this week. Three days of wall-to-wall coverage, double CUBE sets, check out thecube.net for all the live coverage. Check out siliconangle.com, wikibon.com as well for all the research. We'll be back right after this short break. We're live at Dell Technologies World 2018.

>> Speaker: From the SiliconANGLE Media Office in Boston, Massachusetts, it's TheCube. Now, here's your host, Stu Miniman. >> I'm Stu Miniman, and this is a special Cube conversation here in our Boston area studio. Happy to welcome to the program Bobby Allen, who's the chief technology officer and chief evangelist at CloudGenera. Bobby thanks so much for joining us. >> Thank you Stu, thanks for having us. >> Alright so Bobby we had a great conversation with your CEO Brian Kelly talking about CloudGenera, helping customers if, in my own words I'll say, there's this great mess of the cloud and service providers and data centers and things are changing all the time. And here's a great tool to help people understand this. Now, I've had people asking me for years, it's like "Hey, I've got my app, "or I'm building a new app, where do I do this?" And I've always said well, there are certain things that are really easy. If it's going to be up for a really short period of time, and it's something there, it's like you're not going to spend the time to rack and stack and build and do this. hey, Cloud was great for that. And on the other end of the spectrum now, the public clouds might disagree, but if I have something that's just like it's going to be cooking along and it's not changing and it's there, the rent versus buy analogy once again goes towards kind of doing it in a hosted or my own data center. But there's a whole lot of stuff in the middle, That is, well, it depends. There's there's this uncertainty in the world and that's where you live, so bring us in a little bit as to some of the thinking as to how CloudGenera helps and where let's get into it. >> That's a great question Stu. So, we feel like the market is actually changed, in the sense that information is coming faster and faster, there's more and more information that people are inundated and honestly overwhelmed by. And so when people ask us for more information, we typically tell them you don't need more information in our opinion, you really want to move from information to clarity to insight, "What should I actually do?" And so to go back to the real estate analogy you talked about, I think people think of cloud as a house. Cloud is at least a neighborhood if not a state, and you need to figure out where should I live within that state or that neighborhood. So, let's take AWS for example. AWS is a vendor that has many, many, many services, but also different flavors of how you can run things. So before people would look at CloudGenera as a company that can compare different execution venues. Do I want to run this in Amazon or Azure or Google? Still we increasingly get people that want to understand which flavor of Amazon should I do? Do I do the multi-tenant, do I do the dedicated, do I do the VMware cloud on AWS? And those are all valid choices for us. And so for us, we don't really care where a customer wants to evaluate. Let's define what you need and map that to the relevant or interesting options in the marketplace, and then take the guesswork out of it so you have some data-driven decision making. >> Yeah, I love that because I have been covering Amazon for many years, and boy I go to the show and it was like "Alright, I thought I got my arms around Aurora and now there's the serverless based Aurora, and there's 17 different database options inside of Amazon so, oh boy," and then, right. Let's not even talk about all the compute instances. I think it's more complicated to pick a compute instance in the public cloud than it is if I was going to put something in my own rack these days. >> Bobby: Yes, yes it is. >> So, but that being said I want to for a second before we talk about the public cloud, talk to your viewpoint, how are you helping customers in kind of the service provider to data center world. And because that's a complicated and very I have to say fragmented space. >> It is. >> How does CloudGenera help there? >> So CloudGenera deals with the consumers, so ones who actually want to benefit from the technology themselves, but also from the service provider side. So if you're Joe's Cloud Shack, or regional cloud provider or Vmware service provider, anyone who is offering technology services, you may want to know number one, how do you compare with the large hyperscale providers, and then number two, how can you showcase your valued proposition next to those. So maybe Amazon and Azure and Google are on the top of peoples' minds, but how do your services compare to those? So in our platform you can actually show a Joe's Cloud Shack next to an Amazon next to something like a Synergy or SimpliVity. So options inside and outside the data center that you thought about and then ones that you didn't can all be kind of presented in a fair way, so you take the guesswork out of how they compare to each other. >> Yeah, it's interesting. One of the big raging debates we've had out there is, "Oh I wish I had a cloud concierge." And it's like well, it's not a utility, and therefore, I could stand up something in my data center or I could put a Paz in my environment or there's so many layers in the stack and so much nuance that it's the paradox of choice I think that most people have. So, maybe walk us through a customer. When do they tend to come to you, what are some of those patterns, and what are the things that really help get accelerated when they use a platform like yours? >> So, some of the things that people think about are they have workloads that they want to move maybe they want to exit a data center, or what really happens commonly is there's a new leader in town. New CIO comes in, "We're going to have a cloud-first strategy." And we're not opposed to that. The biggest principle for us is do you understand why you're doing, and whether this is the right time, the when? Because if you don't do the right thing at the right time for the right reason there's a hole in your strategy. And so what we look at is, okay what is it that you're trying to move or change or transform, What are the things that are interesting to you or strategic, and then let's look at putting those things together. Now when you define what you need, you shouldn't define what you need in terms of where you're going, right. I don't decide my venue based on the airline I want to get on, I decide I need to be in Vegas for this conference at this time, and then I see the airline that can get me there on time for the best price, hopefully. And we take that same approach when it comes to helping customers. Let's talk about what you need in a vendor agnostic way that's divorced from the options in the market. Because your needs are not impacted by Amazon or Azure or HPE or Dell. And so then, after we define your expectations and your requirements let's map those to the things that you're curious about, or that your leadership says are strategic, and then let's make sure that we understand what we call the concept of logical equivalence. The spirit of your requirement may be called x in one provider and y in a different one, are they really the same as a tomato to-mah-to, or are they really two different types of, excuse me, services or entities altogether? So let's, let's evaluate then, how well your needs are met by these different vendors. Is it just a semantics issue or are these really two different things? Yes, they're both different types of block storage but the requirements are different. The latency is different, the redundancy is different, the pricing is certainly different. How close are these things to meeting the spirit of what you asked for? And the other parts too that I'll just offer that we see a lot is people are concerned overly about cost. How much does it cost? And we feel like the problem is not a problem of cost, it's a problem of value. People go to look for cost calculators but really what they need are value calculators, right? I take a Porsche and an F-150. An F-150 is a bigger vehicle but the Porsche is more expensive for a reason. There's a different experience than just space. And so the reality is people don't mind paying more if they know what they're paying for. Transparency is really the key. >> On that cost piece though, how much of the total equation do you look at? So I think about, my data center there's everything like the power, space, and all those pieces, if I go to a service provider, if it's my stuff, if I still have to manage it, versus some of the operational expenses. How much of kind of the, I hate to say total cost, but how much of that spread do you look at? >> We try to be pretty comprehensive, Stu. So, if you go to a public provider for example you're not paying for power but you're paying for a certainly hourly charge typically on an (mumbling) basis that accommodates a lot of the things that I'll say are platform or hypervisor and below. Now where I think a lot of the other people that are in this space maybe fall short, and our opinion is that they don't look at things above the hypervisor. If I move a workload to an AWS, they may have some great services I can take advantage of. The labor and the licensing and the other considerations that we consider to be carryover costs are things that I still need to accommodate. If I put a workload in Amazon, someone still needs to patch the OS, maybe manage the database, maybe audit security. Those are things that have labor and licensing and software considerations that we try to look at. So we try to be as comprehensive as possible, but we also look at SLA, we also look at security, so you may need to bring another manage services or consulting or software packages to fill those other gaps, so we try to be as holistic and comprehensive as possible. >> What other kind of patterns and data do you bring for CloudGenera? So thinking things either from a vertical standpoint or kind of size of company. I just think there's been certain movements in virtualization and containers and the like where there's been kind of that data and how do I understand what's going to make sense for me, so. Does CloudGenera get into any of that? >> We do get into some of that. So we try again not to force anything down someone's throat. We try to look at where you are, but also understand that there are some patterns. So for example, when we talk about different industry verticals it's very aligned to security and compliance for example. So we know that there are certain providers that are interesting but not ready for primetime because they don't have HIPAA, high tech, high trust, things that are typically relevant for the healthcare industry, so we're very quickly able to say this is something that may not be right for you just yet. Or if you have certain regional concerns, maybe you're looking at GDPR in Europe, you're looking at IRAP in Australia, we can, again, typically guide them to, this provider has some very interesting services but they don't have the security or the SLA that you need. So we try to do that to kind of whittle it down. The other thing that we're seeing though, Stu, is that honestly, many enterprises are biting off more than they can chew. They try to do too much at once, and so some of the things that we talked about, even off camera, is I would ask the question "Does the industry have a POT problem? "Are we trying to do too much at once?" And when I say POT I'm using that to represent the acronym of, to me, three pieces that we need to break this down to. Number one is parity, number two is optimization, and then number three is transformation. Many enterprises in our opinion are trying to eat an elephant with a spoon. They have no idea how to get there and they really don't understand what is too much in terms of the cost, and so when they're evaluating how much they can handle, how much change is too much, in terms of people, process, and technology, the thing to us is, what does parity look like? And that may mean a lift and shift in some cases, it may not, but you at least have to define what success looks like if you take what you're doing in your data center and move that somewhere else. But then, the middle ground is optimization. How do I take the spirit of what I'm doing, move it to that venue and then kind of clean it up or optimize it a little bit, and then once I'm there and I can evaluate the unintended consequences of change, what are the things that I didn't think about? The impacts to my people, the retraining, the other software package I need to put in place for monitoring and management, and so forth. Once I have a handle on that, then I can finally move from optimization to transformation, but that's not, that's not glamorous. That's not interesting. People don't want to talk about that. They want to go whole hog and change everything all at once and we get into trouble doing that. >> Bobby you've given me flashbacks. I worked in the storage industry for a decade, and migrations, you still kind of wake up in the middle of the night, screaming a little bit because it's always challenging, there's always all of those things to work through. You think you've gone through all of your checklists and then, oh wait, something didn't work. Database migrations, big discussion going on there. From Wikibon David Floyer has just been like, it's so many horror stories. People get there but it's, if you don't have to, maybe you don't want to, but there's so many reasons why you want to, so, I guess I want to highlight, we're not telling people not to change, and moving faster and getting on board, some modernization's a good thing, everywhere. You've got a virtualization environment, there's lots you can do today that we couldn't do two or four years ago. So, how do we get over this POT problem then? >> I think part of it is, so again going back to the moving analogy, if I'm going to move, Stu, it would be foolish for me to move without getting an estimate. And there are times when an estimate should be able to come in my house and tell me "It's actually better for you to sell that piano "than to try to move it, 'cause it's not worth it." I would want someone, if I were CIO in an enterprise today, to tell me, "Don't waste your time focusing on this, "this is really where you need to focus your time "because this is going to be the Pareto principle "that saves you the time and the money." The reality is bringing someone who's benefited from the land mines and the pitfalls, so in our opinion, bringing whether that's an SI, consultancy, a data service company like CloudGenera that's benefited from a lot of the things we've seen in the industry, don't hit things on your own that other people have stumbled on, right? Benefit from others' mistakes to allow you to take a look at the whole thing. So the challenge that I think we're having, Stu, is that we're proficient in talking about these things, there aren't enough use cases in terms of mature of cloud transformations to really look back at anecdotal data this comprehensive. We're still figuring a lot of this stuff out, and I know people don't want to hear that, but that's my opinion. >> So, Bobby, is there some place when I'm filling out these forms that I put in here's the skill set my team has, and a little alarm goes off and says, "Hey, time to do some retraining, some reskilling, "maybe bringing on some new people "to handle some of these new areas." How do you handle that side of it? >> I think part of it is honestly, and this may sound a little trite, I think people that are willing to raise their hand and say that we need some help or that "We don't have this all figured out," or that "There are some things that we need to bring in "a little bit of help to help us get that estimate "before we look to move everything," that's really the skill set you want to have. People that are not saying, "I'm the (mumbles) "juggernaut of everything cloud," because those people don't exist yet in my opinion. There are people that have pockets of expertise in things that they have really deep knowledge about, but we need to mix that with, I think, a healthy appreciation for the fact that there's still a lot of things that we're learning about together. The other part of that, Stu, is it's a community and it's a network. You may know storage migrations, I may know database migrations, let's put our heads together about how we can work together as an enterprise and make sure that we minimize impact to the users, because at the end of the day, that's really the challenge, is not to do a cool project, it's to deliver value to the business, and that's what I think we're loosing sight of with all this cool technology sometimes. >> Alright, so Bobby you've got over a thousand people using the tool. What are some of the big areas that people are like, "Oh wow, this is the stuff that's saving me "either lots of time, lots of money, saving my business, "and heck if I'm running the show, keeps my job"? >> I think storage is a big one. So people are oftentimes unaware that there are so many different ways that you can run storage in a given provider. So Amazon for example has four to six different ways you can just run block storage in their particular multi-tenant cloud, and people aren't aware of that. So there's a case that we did for a major bank. We showed them that a terabyte of storage in Amazon can run from 300 dollars up to 26 thousand dollars depending on the level or performance that you want to hit. Egress is another one, so what does the network behavior look like in those applications? Because people often will estimate the resources but not the traffic. What are the estimates to have a level of parity around security. So I don't have HIPAA compliance or SOP compliance in this particular provider. What is it going to take me to get to that level of parity that I need to have, because if I save money, Stu, but I have to spend all that on my lawyer because my data got accessed, then I've still got a problem, I've just kind of moved that down the road. So lots of things out there that I believe we're hiding in plain sight. Again, information is out there that we just don't have the filters to find. What I would say is a lot of people think that cloud is a commodity, we're not there yet. There're providers to this day, I can't give any names to protect the innocent, but the same service is literally triple in one provider what it costs in another one for almost exactly the same service. And there're examples like that that have been out there for years, we just can't see them. >> So, Bobby, last question, if somebody wanted to get started with CloudGenera, is there like a trial version, or how would somebody get involved? >> Yeah, so a couple things that are really interesting. So there's a try now button on our website that lets you kind of answer a few questions and actually get a sample mini-assessment, download a sample report, and actually see the type of analysis that we provide, number one. Number two, CloudGenera is a software company but also a services company. If you want to purchase the software, great, and we actually have trials that we can set up for you to do that. We also do what we call proofs of value. If you want to engage our team to come in and do five to ten applications to see how those might look with our analysis, and then they go at scale and look at your whole CMDB. We want to make sure we're meeting the needs of the business and not trying to boil the ocean if they're not ready for that yet. >> Bobby Allen, CTO and chief evangelist to CloudGenerate, thanks so much for joining me. So much happening in the cloud world. Be sure to check out thecube.net for all of our coverage, as well as wikibon.com for all the research. Thanks for watching theCUBE, I'm Stu Miniman.

>> Hi, I'm Peter Burris, and welcome to Wikibon's Action Item. (funky electronic music) We're broadcasting, once again, from theCUBE studios in lovely Palo Alto. And I've got the Wikibon research team assembled here with me. I want to introduce each of them. David Floyer. >> Hi. >> George Gilbert are here in the studio with me. Remote we have Jim Kobielus, Stu Miniman, and Neil Raden. Thanks everybody for joining. Now, we're going to talk about something that is increasingly overlooked, that we still think has enormous importance in the industry. And that is, does hardware matter? For 50 years, in many respects, the rate of change in industry has been strongly influenced, if not determined by the rate of change in the underlying hardware technologies. As hardware technologies improved, the result was that software developers would create software that would fill up that capacity. But we're experiencing a period where some of the traditional approaches to improving hardware performance are going down. We're also seeing that there is an enormous, obviously, move to the cloud. And the cloud is promising different ways of procuring the infrastructure capacity that businesses need. So that raises the question with potential technologies constraints on the horizon, and an increasing emphasis on utilization of the cloud, is systems integration and hardware going to continue to be a viable business option? And something that users are going to have to consider as they think about how to source their infrastructure? Now there are a couple of considerations today that are making this important right now. Jim Kobielus, what are some of those considerations that increase the likelihood that we'll see some degree of specialization that's likely to turn into different hardware options? >> Yeah Peter, hi everybody. I think one of the core considerations is that edge computing has become the new approach to architecting enterprise and consumer grade applications everywhere. And edge computing is nothing without hardware on the edge, devices as well as hubs and gateways and so forth, to offload and the handle much of the processing needed. And increasingly, it's AI, artificial intelligence. deep learning, machine learning. So going forward now, looking at how it's shaping up, hardware's critically important. Burning AI, putting AI onto chipsets, low power, low cost chips that can do deep learning, machine learning, natural language processing, fast, cheaply, in an embedded form factor, critically important for the development of edge computing as a truly end-to-end distributed fabric for the next generation of application. >> So Jim, are we likely to see greater specialization of some of those AI algorithms and data structures and what not, drive specialization and the characteristics of the chips that support it, or is it all going to be just default down to tensor flow or GPUs? >> It has been GPUs for AI. Much of AI, in terms of training and inferencing, has been in the cloud, and much of it has been based historically, heretofore, on GPUs, and video being the predominant provider. However, GPUs historically have not been optimized for AI, because they've been built for gaming and consumer applications. However, the next generation, the current generation, from Nvidia and others, are chipsets in the cloud and other form factors for AI, incorporates what's called tensor core processing, really a highly densely packed tensor core processing components to be able to handle deep learning neural networks, very fast, very efficiently for inferencing and training. So Nvidia and everybody else now is making a big bet on tensor core processing architecture. Of course Google's got one of the more famous ones, their TPU architecture, but they're not the only ones. So going forward, we're looking at, in the AI ecosystem, especially for edge computing, there increasingly will be a blend of GPUs like for cloud based core processing, TPUs or similar architecture, or device-level processing. But also, FPGAs, A6, and CPUs are not out of the running because for example, CPUs are critically important for systems on the chip, which are quite fundamentally important for unattended operation as well as attended operation in terms of edge devices to handle things like natural language processing for conversational UIs. >> So that suggests that we're going to see a lot of new architecture thinking introduced as a consequence of trying to increase the parallelism through a system by incorporating more processing at the edge. >> Jim: Right. >> That's going to have an impact on volume economics and where the industry goes from an architecture standpoint. David Floyer, does that ultimately diminish the importance of systems integration as we move from the edge back towards the core and towards cloud in whatever architectural form it takes? >> I think the opposite, it actually is, systems integration becomes more important. And the key question has been can software do everything? Do we need specialized hardware for anything? And the answer is yes, because the standard x86 systems are just not improving in speed at all. >> Why not? >> That's a long answer to that. But it's to do with the amount of heat that's produced, and the degree of density that you can achieve. Even the chip itself-- >> So the ability to control bits flying around the chip-- >> Correct. >> Is going down-- >> Right. >> As a consequence of dispersion of energy and heat into the chip. >> Right, There are a lot of other factors as well. >> Other reasons as well, sure. >> But the important thing is, how do you increase the speed? And a standard x86 cycle time with it's instruction set, that's now fixed. So what can you do? Well, you can obviously, reduce the number of instructions and then parallelize those instructions within that same space. And that's going to give you a very significant improvement. And that's the basis of GPUs and FPGAs. So GPUs for example, you could have floating point arithmetic, or standard numbers or extended floating point arithmetic. All of those help in calculations, large scale calculations. The FPGAs are much more flexible. They can be programmed in very good ways, so they're useful for smaller volume things. A6 are important, but what we're seeing is a movement to specialized hardware to process AI in particular. And one area is very interesting to me is, to take the devices at the edge, what we call the level one systems. Those devices need to be programmed very, very intently for what is happening there. They are bringing all the data in, they're making that first line reduction of data, they're making the inferences, they're taking the decisions based on that information coming in and then sending much less data up to the level twos above it. So what are examples of this type of system that exist now? Because in hardware, volume matters. The amount of stuff you produce, the costs go down dramatically. >> And software too, in the computing industry, volume matters. >> Absolutely, absolutely. >> I think it's pretty safe to say that. >> Yeah, absolutely. So volume matters, so it's interesting to look at one of the first real volume AI applications, which is in the iPhone X. And Apple have introduced the latest chipset. It has neural networks within it. It has GPUs built in, and it's being used for simple things like face recognition and other areas of AI. And the interesting thing is the cost of this. The cost of that whole set, the chip itself, is $27. The total cost with all the senors and everything, to do that sort of AI work is $100. And that's a very low bar, and very, very difficult to introduce in other ways. So this level of integration for the consumer business in my opinion, is going to have a very significant effect on the choices that are made by manufacturers of devices going into industry and other things. They're going to take advantage of this in a big way. >> So Neil Raden, we've heard, or we've been down the FPGA road for example, in the past, data warehousing introduced, or it was thought that data warehouse workloads which did not necessarily lend themselves to a lot of the prevailing architectures in the early 90s, could get this enormous acceleration by giving users greater programmable control over the hardware. How'd that work out? >> Well, for Intersil for example, what actually worked out pretty well for awhile. But what they did is they used that PGA to handle the low-level data stuff and maybe reducing the complexity of the query before it was passed on to the CPUs where things ran in parallel. But that was before Intel introduced multi-core chips. And it kind of killed the effectiveness. And the other thing was, it was highly proprietary which made it impossible to take up to the cloud. And there was no programming. I always laugh when people say FPGA because it should have been called FGA. Because there was no end user computing of an FPGA. >> So that means that, although we still think we're going to see some benefit from this. But it kind of brings us back to the cloud, because if hardware economics are improved to scale, then that says that there are a few companies that are likely to drive a lot of the integration issues. If things like FPGAs don't get broadly diffused and programmed by large numbers of people, but we can see how they could, in fact, dramatically improve the performance, and quality of workloads, then it suggests that some of these hyperscalers are going to have an enormous impact ultimately on defining what constitutes systems integration. Stu, take us through some of the challenges that we've heard recently on the cloud, or on theCUBE at reinvent and other places, about how we start seeing some of the hyperscalers make commitments about specialized hardware, the role that systems integration's going to play, and then we'll talk about whether that could be replicated across more on-premise types of systems. >> Sure Peter, and to go back to your opening remarks for this segment, does hardware matter? When we first saw cloud computing roll out, many people thought that this was just undifferentiated commodity equipment. But if you really dig in and understand what the hyperscalers, the public cloud companies are doing, they really do what I've called hyperoptimize the solution. So when James Hamilton and AWS talks about their infrastructure, they don't just take components and throw a bunch of stuff from off the shelf out there. They build for every application, a configuration, and they just scale that to tens of thousands of nodes. So like what we had done in the enterprise before, which was build a stack for an application, now the public cloud does that for services and for applications that they're building up the stack. So hardware absolutely matters. And if we look not only at the public cloud, but you mentioned on the enterprise side, it's where do I need to think about hardware? Where do I need to put time and effort? What David Floyer's talked about is that integration is still critically important. But the enterprise should not be worrying about taking all of the pieces and putting them together. They should be able to buy solutions, leverage platforms that take care of that environment. Very timely discussion about all of the Intel issues that are happening. If I'm using a public cloud, well I don't have to necessarily worry about, I need to worry about that there was an issue, but I need to go to my supplier (chuckles) and make sure that they are handling that. And if I'm using serverless technology, obviously I'm a little bit detached from what that, whether or not I have that issue, and how that gets resolved. So absolutely, hardware is important. It's just, who manages that hardware, what pieces I need to think about, and where that happens. And the fascinating stuff happening in the AI pieces that Jim's been talking about, where you're really seeing some of the differentiation and innovation happening at the hardware level, to make sure that it can react for those applications that need it. >> So we've got this tension in the model right now. We've got this tension in the marketplace, where a lot of the new design decisions are going to be driven by what's happening at the edge. As we try to put more software out to where more human activity or system activity's actually taking place. And at the same time, a lot of the new design and architecture decisions being, first identified and encountered by some of the hyperscalers. The workloads are at the edge, the new design decisions are at the hyperscaler, latency is going to ensure that there is a fair amount of, a lot of workload that remains at the edge, as well as cost. So what does that mean for that central class of system? Are we going to see, as we talk about, TPC, true private cloud, becoming a focal point for new classes of designs, new classes of engineering? Are we going to see a Dell-EMC box that says, "designed in Texas," or "designed in Hopkinton," and is that going to matter to users? David Floyer, what do we think? >> So it's really important from the consumer point, from the customer's point of view, that they can deal with a total system. So if they want a system at the very edge, the level one we want, to do something in the manufacturing, they may go to Dell, but they may also go to Sony or they may go to Honeywell or NCL-- >> Rahway, or who knows. >> Rahway, yes, Alibaba. There are a whole number of probably new people that are going to be in that space. When you're talking about systems on site for the high level systems, level two and above, then they are going to be very, it will be very important to them that the service level that comes from the manufacturer, the integration of all the different components, both software and hardware, come from that manufacturer. He is organizing it from a service perspective. All of those things become actually more important in this environment. It's more complex, there are more components. There are more FPGAs and GPUs and all sorts of other things, connected together, it'll be their responsibility as the deliverer of a solution, to put that together and to make sure it works, and that it can be serviced. >> And very importantly to make sure, as you said, that it works and it can be serviced. >> Yeah. >> So that's going to be there. So the differentiation will be, does the design and engineering lead to simpler configuration, simpler change. >> Absolutely. >> Accommodate the programming requirements, accommodate the application requirements, all that are-- >> All in there, yes. >> Approximate to the realities of where data needs to be. George, you had a comment? >> Yeah, I got to say, having gone to IBM's IOT event a year ago in Munich, it was pretty clear that, when you're selling these new types of systems that we're alluding to here, it's like a turnkey appliance. It's not just bringing the Intel chip down. It's as David and Jim pointed out, it's a system on a chip that's got transistor real estate for specialized functions. And because it's not running the same scalable clustered software that you'd find in the cloud, you have small footprint software that's highly verticalized or specialized. So we're looking at lower volume, specialized turnkey appliances, that don't really share the architectural and compatibility traits of the enterprise and true private cloud cousins. And we're selling it, for the most part, to new customers, the operations technology folks, not IT, and often, you're selling it in conjunction with the supply chain master. In other words, auto OEM might go to their suppliers in conjunction with another vendor and sell these edge devices or edge gateways. >> And so that raises another very important question. Stu, I'm going to ask this of you. We're not going to be able to answer this question today. It's a topic for another conversation. But one of the things that the industry's not spending enough time talking about is that we are in the midst of a pretty consequential shift from a product orientation in business models to a service orientation in business models. We talk about APIs, we talk about renting, we talk about pay-as-you-go. And there is still an open question about how well those models are going to are going to end up on premise in a lot of circumstances. But Stu, when we think about this notion of the cloud experience, providing a common way of thinking about a cloud operating model, clearly the design decisions that are going to have to be made by the traditional providers of integrated systems are going to have to start factoring that question of how do we move from a product to a service orientation along with their business models, their way of financing, et cetera. What do you think is happening? Where's the state of the art in that today? >> Yeah, and Peter, it actually goes back to when we at Wikibon launched the true private cloud research a little bit over two years ago. It was not just saying, "How do we do something "better than virtualization?" It was really looking at, as you said, that cloud operating model. And what we're hearing very loud from customers today is, it's not that they have a public cloud strategy and an private cloud strategy. They have a cloud strategy (chuckles). And one of the challenges that they're really having is, how do they get their arms around that? Because today their private cloud and their public cloud a lot of times it's different suppliers, it's different operating environments as you said. We could spend a whole nother call on just discussing some of the nuance and pieces here. But the real trend we've been seeing, and kind of the second half of last year, and big thing we'll see, I'm sure, through this year, is what are the solutions? And how can customers manage this much simpler? And what are the technology pieces? And operational paradigms that are going to help them through this environment? And yeah, it's a little bit detached from some of the hardware discussion we're having here. Because of course, at the end of the day, it shouldn't matter what hardware or what locale I'm in, it's how I manage the entire environment. >> But it does (laughs). >> Yeah. >> It shouldn't matter, but the reality is, I think we're concluding that it does. >> Right, we think back to, oh back in the early days, "Oh, virtualization, great. "I can take any x86. "Oh wait, but I had a BIOS problem, "and that broke things." So when containers rolled out, we had the same kind of discussion, this, "Oh wait." There was something down at the storage or networking layer that broke. So it's always, where is the proper layer? How do we manage that? >> Right, I for one just continue to hope that we're going to see the Harry Potter computing model show up at some point in time. But until then, magic is not going to run software. It's going to have to run on hardware, and that has physical and other realities. All right, thanks guys. Let's wrap this one up. Let me give some, what the action item is. So this week, we've talked about the importance of hardware in the marketplace going forward. And partly, it's catalyzed by an event that occurred this week. A security firm discovered a couple of flaws in some of the predominant, common, standard volume CPUs, including Intel's, that have long term ramifications. And while one of the fixes is not going to be easy, the other one can be fixed by software. But the suggestion is that the fix, that software fix would take out 30% of the computing power of the chip. And we were thinking to ourselves, what would happen if the world suddenly lost 30% of their computing power overnight? And the reality is, a lot of bad things would happen. And it's very clear that hardware still matters. And we have this tension between what's happening at the edge, where we're starting to see a need for greater distribution of function that's performing increasingly specialized workloads, utilizing increasingly new technology, that's not, that the prevailing stack is not necessarily built for. So the edge is driving new opportunities for design that's going to turn into new requirements for hardware that will only be possible if there's new volume markets capable of supporting it, and new suppliers bringing it to market. That doesn't however mean that the whole concept of systems integration goes away. On the contrary, even though we're going to see this enormous amount of change at the edge, there's an enormous net new invention in what does it mean to do systems integration? We're seeing a lot of that happen in the hyperscalers first, in companies like Amazon, and Google, and elsewhere. But don't be fooled. The HPE's the IBM's, the Dell-EMC's are all very cognizant of these approaches and these changes, and these challenges. And in many respects, a lot of the original work, a lot of the original invention is still being performed in their labs. So the expectation is the new design model is being driven by the edge. Plus the new engineering model's being driven by the hyperscalers, will not mean that it all ends up in two tiers. But we will see a need for modern systems integration happening in the true private cloud, on the premise, where a lot of the data and a lot of the workloads and a lot of the intellectual property is still going to reside. That however, does not mean that the model going forward is the same. Some of the new engineering dynamics, or some of the new design dynamics will have to start factoring in how the hardware simplifies configuration. For example, FPGAs have been around for a long time. But end users don't program FPGAs. So what good does it do to reflect the FPGA capability inside a box, inside a true private cloud box, if the user doesn't have any simple, straightforward, meaningful way to make use of it? So a lot of new emphasis on improve manageability, AI for ITOM, ways of providing application developers access to accelerated devices. This is where the new systems and design issues are going to manifest themselves in the marketplace. Underneath this, when we talk about unigrid, we're talking about some pretty consequential changes ultimately in how design and engineering of some of these big systems works. So our conclusion is, lots that the hardware still matters, but that the industry continued to move and drive in a direction that reduces the complexity of the underlying hardware. But that doesn't mean that users aren't going to have to, aren't going to encounter serious, serious decisions and serious issues regarding which supplier they should work with. So the action item is this. As we move from a product to a service orientation in the marketplace, hardware is still going to matter. That creates a significant challenge for a lot of users, because now we're talking about how that hardware is rendered as platforms that will have long-term consequences inside a business. So CIOs, start thinking about 2018 as the year in which you start to consider the new classes of platforms that you're going to move to. Because those platforms will be the basis for simplifying a lot of underlying decisions regarding where is the best design and engineering of infrastructure going forward. Once again, I want to thank my Wikibon teammates. George Gilbert, David Floyer, Stu Miniman, Neil Raden, Jim Kobielus, for a great Action Item. From theCUBE studios in Palo Alto, this has been Action Item. Talk to you soon. (funky electronic music)

>> Welcome to another edition of Wikibon's Weekly Research Meeting on theCUBE. (techno music) I'm Peter Burris, and once again I'm joined by, in studio, George Gilbert, David Floyer. On the phone we have Dave Vellante, Stu Miniman, Ralph Finos, and Neil Raden. And this week we're going to be visiting Dell EMC's Analyst Summit. And we thought we'd take some time today to go deeper into the transition that Dell and EMC have been on in the past few years, touching upon some of the value that they've been creating for customers and addressing some of the things that we think they're going to have to do to continue on the path that they're on and continue to deliver value to the marketplace. Now, to look back over the course of the past year, it was about a year ago that the transaction actually closed. And in the ensuing year, there's been a fair amount of change. We've seen some interesting moves by Dell to bring the companies together, a fair amount of conversation about how bigger is better. And at the most recent VMworld, we saw a lot of great news of VMworld, VMware in particular working more closely with Amazon and others, or AWS and others. So we've seen some very positive things happen in the course of the past year. But there are still some crucial questions that are addressed. And to kick us off, Dave Vellante, where are we one year in and what are we expecting to hear this week? >> Dave: And foremost, Michael Dell was trying to transform his company. It wasn't happening fast enough. He had to go private. He wanted to be an enterprise player, and amazingly, he and Silver Lake came up with four billion dollars in cash. And they may very well pull off one of the greatest wealth creation trades in the history of the computer industry because for four billion dollars, they're getting an asset that's worth somewhere north of 50 billion, and they're paying down the debt that they used to lever that acquisition through cash flow. So like I say, for a pittance (laughs) of four billion dollars, they're going to turn that into a lot of dough, tens and tens of billions. If you look at EMC pre the M and A, I'm sorry, if you look at Dell pre M and A, pre-merger, their transformation was largely failing. The company was making a lot of acquisitions but it wasn't able to reshape itself fast enough. If you look at EMC pre-merger, it was a powerhouse, but it was suffering from this decade-long collapse of infrastructure hardware and software pricing, which was very much a drag on growth and cash flow. So the company was forced to find a white knight, which came in the form of Michael Dell. So you had this low gross margin company, Dell's public gross margin before it went private were in the teens. EMC was in the roughly 60%. Merge those together and you get a roughly 30% plus gross margin entity. I don't think they're there yet. I think they got a lot of work to do. So a lot of talk about integration. And there's some familiarity with these two companies because they had a fairly large OEM deal for the better part of a decade in the 90s. But culturally, it's quite different. Dell's a very metrics-driven culture with a lot of financial discipline. EMC's kind of a take the hill, do whatever it takes culture. And they're in the process of bringing those together, and a lot of cuts are taking place. So we want to understand what impacts those will have to customers. The other point I want to make is that without VMware, in my view anyway, the combination of these companies would not be nearly as interesting. In fact, it would be quite boring. So the core of these companies, you know, have faced a lot of challenges. But they do have VMware to leverage. And I think the challenge that customers really need to think about is how does this company continue to innovate now that they can't really do M and A? If you look at EMC, for years, they would spend money on R and D and make incremental improvements to its product lines and then fill the gaps with M and A. And there're many, many examples of that, Isilon, Data Domain, XtremIO, and dozens of others. That kept EMC competitive. So how does Dell continue that strength? It spends about four and a half billion a year on R and D, and according to Wikibon's figures, that's about 6% of revenue. If you compare that with other companies, Oracle, Amazon, they're into the 12%. Google's mid-teens. Microsoft, obviously to 12, 13%. Cisco's up there. EMC itself was spending 12% on R and D. So IBM's only about 6%, but remember IBM, about two thirds of the company is services. It's not R and D heavy. So Dell has got to cut costs. It's a must. And what implications does that have on the service levels that customers have grown to expect, and what's the implications on Dell's roadmap? I think we would posit that a lot of the cash cows are going to get funded in a way that allows them to have a managed decline in that business. And it's likely that customers are going to see reduced roadmap functions going forward. So a key challenge that I see for Dell EMC is growth. The strength is really VMware, and the leverage of the VMware and their own install base I think gives Dell EMC the ability to keep pace with its competitors because it's got kind of the inside baseball there. It's got a little bit of supply chain leverage, and of course its sales force and its channels are a definite advantage for this company. But it's got a lot of weaknesses and challenges. Complexity of the portfolio, it's got a big debt load that hamstrings its ability to do M and A. I think services is actually a big opportunity for this company. Servicing its large install base. And I think the key threat is cloud and China. I think China, with its low-cost structure, made a deal like this inevitable. So I come back to the point of Michael Dell's got to cut in order to stay competitive. >> Peter: Alright, so one of the, sorry- >> Dave: Next week, hear a lot about sort of innovation strategies, which are going to relate to the edge. Dell EMC has not announced an edge strategy. It needs to. It's behind HPE in that regard, one its major competitors. And it's got to get into the game. And it's going to be really interesting to see how they are leveraging data to participate in that IOT business. >> Great summary, Dave. So you mentioned that one of the key challenges that virtually every company faces is how do they reposition themselves in a world in which the infrastructure platform, foundation, is going to be more cloud-oriented. Stu Miniman, why don't you take us through, very quickly, where Dell EMC is relative to the cloud? >> Stu: Yeah, great question, Peter. And just to set that up, it's important to talk about one of the key initiatives from Dell and EMC coming together, one of the synergies that Michael Dell has highlighted is really around the move from converged infrastructure to hyper converged infrastructure. And this is also the foundational layer that Dell EMC uses today for a lot of their cloud solutions. So EMC has done a great job with the first wave of converged infrastructure through partnering with Cisco. They created the Vblock, which is now VxBlock, which is now a multi-billion dollar revenue stream. And Dell did a really good job of jumping on early with the hyper converged infrastructure trend. So I'd written research years ago that not only was it through partnerships but through OEM deals, if you look at most of the solutions that were being sold on the market, the underlying server for them was Dell. And that was even before the EMC acquisition. Once they acquired EMC, they really get kind of control, if you will, of the VMware VSAN business, which is a very significant player. They have an OEM relationship with Nutanix, who's doing quite well in the space, and they put together their own full-stack solution, which takes Dell's hardware, the VMware VSAN, and the go-to-market processes of what used to be VCE, and they put together VxRail, which is doing quite well from a revenue and a growth standpoint. And the reason I set this all up to talk about cloud is that if you look at Dell's positioning, a lot of their cloud starts at that foundational infrastructure level. They have all of these enterprise hybrid clouds and different solutions that they've been offering for a few years. And underneath those, really it is a simplified infrastructure hardware offering. So whether that is the traditional VCE converged infrastructure solutions or the newer hyper converged infrastructure solutions, that's the base level. And then there's software that wraps on top of it. So they've done a decent amount of revenue. The concern I have is, you know, Peter, you laid out, it's very much a software world. We've been talking a lot at Wikibon about the multi-cloud nature of what's going on. And while Dell and the Dell family have a very strong position in the on-premises market, that's really they're center strength, is around hardware and customer and the enterprises data center. And the threat is public cloud and multi-cloud. And if it centers around hardware and especially when you dig down and say, "okay, I want to sell more servers," which is one of the primary drivers that Michael wants to have with his whole family of solutions, how much can you really live across these in various environments? Of course, they have partnerships with Microsoft. There's the VMware partnerships with Amazon, which is interesting, how they even partner with the likes of Google and others, it can be looked at. But from that kind of center strength is on premises and therefore they're not really living heavily in the public and multi-cloud world, unless you look at Pivotal. So Pivotal's a software, and that's where they're going to say that the big push is, but it's these massive shifts of large install base of EMC, Dell, and VMware, compared to the public cloud that are doing the land grabs. So this is where it's really interesting to look at. And the announcement that we're interested to look at is how IOT and edge fits into all of this. So David Foyer and you, Peter, research about how- >> Peter: Yeah, well, we'll get to that. >> Stu: There's a lot of nuance there. >> We'll get to that in a second, Stu. But one of the things I wanted to mention to David Floyer is that certainly in the case of Dell, they have been a major player in the Intel ecosystem. And as we think about what's going to happen over the course of the next couple of years, what's going to happen with Intel? It's going to continue to dominate. And what's that going to mean for Dell? >> Sure, Dell's success, I mean, what Stu has been talking about is the importance of volume for Dell, being a volume player. And obviously when they're looking at Intel, the PC is a declining market, and ARM is doing incredibly well in the mobile and other marketplaces. And Dell's success is essentially tied to Intel. So the question to ask is if Intel starts to lose market share to ARM and maybe even IBM, what is the impact on that on Dell? And in particular, what is the impact on the edge? And so if you look at the edge, there are two primary parts. We put forward there are two parts of the edge. There's the primary data, which is coming from the sensors themselves, from the cameras and other things like that. So there's the primary edge, and there's the secondary edge, which is after that data has been processed. And if you think about the primary edge, AI and DL go to the primary edge because that's where the data is coming in, and you want the highest fidelity of data. So you want to do the processing as close as possible to that. So you're looking at these examples in autonomous cars. You're seeing it in security cameras, that all of that processing is going to much cheaper chips, very, very close to the data itself. What that means is that most of that IOT, or could mean, is that most of that IOT could go to other vendors, other than Intel, to go to the ARM vendors. And if you look at that market, it's going to be very specialized in the particular industry and the particular problem it's trying to solve. So it's likely that non-IT vendors are going to be in that business. And you're likely to be selling to OT and not the IT. So all of those are challenges to Dell in attacking the edge. They can win the secondary edge, which is the compressed data, initially compressing it 1,000 to one, probably going to a million to one compression of the data coming from the sensors to a much higher value data but much, much smaller amounts, both on the compute side and on the storage side. So if that bifurcation happens at the edge, the size of marketplace is going to be very considerably reduced for Intel. And Dell has in my view a strategic decision to make of whether they get into being part of that ARM ecosystem for the edge. There's a strong argument that's saying that they would need to do that. >> And they will be announcing something on Monday, I believe, or next week. We're going to hear a lot about that. But when we think, ultimately, about the software that Dell and EMC are going to have to think about, they're very strong in VMware, which is important, and there's no question that virtual machines will remain important, if not only from an install base standpoint but from, in the future, how the cloud is organized and arranged and managed. Pivotal also is an interesting play, especially as it does a better job of incorporating more of the open source elements that are becoming very attractive to developers. But George, let me ask you a question, ultimately, about where is Dell in some of these more advanced software worlds? When we think about machine learning, when we think about AI, these are not strong markets right now, are not huge markets right now, but they're leading indicators. They're going to provide cues about where the industry's going to go and who's going to get a chance to provide the tooling for them. So what's our take right now, where Dell is, Dell EMC is relative to some of these technologies? >> Okay, so that was a good lead in for my take on all the great research David Floyer's done, which is when we go through big advances in hardware, typically relative price performance changes between CPU, memory, storage, networking. When we see big relative changes between those, then there's an opportunity for the software to be re-architected significantly. So in this case, what we call unigrid, what David's called unigrid previously is the ability to build scale-out, extremely high-performance clusters to the point where we don't have to bottleneck on shared storage like a SAN anymore. In other words, we can treat the private memory for each node as if it were storage, direct-attached storage, but it is now so fast in getting between nodes and to the memory in a node that for all intents and purposes, it can perform as if you had a shared storage small cluster before. Only now this can scale out to hundreds, perhaps thousands, of nodes. The significance of that is we are in an era of big data and big analytics. And so the issue here is can Dell sort of work with the most advanced software vendors who are trying to push the envelope to build much larger-scale data management software than they've been able to. Now, Dell has an upward, sort of an uphill climb to master the cloud vendors. They build their own infrastructure hardware. But they've done pools of GPUs, for instance, to accelerate machine learning training. Dell could work with these data management vendors to get pools of this scale-out hardware in the clouds to take advantage of the NoSQL databases, the NewSQL databases. There's an opportunity to leapfrog. What we found out at Oracle, at their user conference this week was even though they're building similar hardware, their database is not yet ready to take advantage of it. So there is an opportunity for Dell to start making inroads in the cloud where their generic infrastructure wouldn't. Now, one more comment on the edge, I know David was saying on the sort of edge device, that's looking more and more like it doesn't have to be Intel-compatible. But if you go to the edge gateway, the thing that bridges OT and IT, that's probably going to be their best opportunity on the edge. The challenge, though, is it's not clear how easy it will be in a low-touch sort of go-to-market model that Dell is accustomed to because like they discovered in the late 90s, it cost $6,000 per year per PC to support. And no one believed that number until Intel did a study on itself and verified it. The protocols from all the sensors on the OT side are so horribly complex and legacy-oriented that even the big auto manufacturers keep track of the different ones on a spreadsheet. So mapping the IT gateway server to all the OT edge devices may turn out to be horribly complex for a few years. >> Oh, it's not a question of may. It is going to be horribly complex for the next few years. (laughing) I don't think there's any question about that. But look, here's what I want to do. I want to ask one more question. And I'm going to go do a round table and ask everybody to give me what the opportunity is and what the threat is. But before I do that, the one thing we haven't discussed, and Dave Vellante, I'm going to throw it over to you, is we've looked at the past of Dell talks a lot about the advantages of its size and the economies of scale that it gets. And Dell's not in the semiconductor business or at least not in a big way. And that's one place where you absolutely do get economies of scale. They got VMware in the system software business, which is an important point. So there may be some economies there. But in manufacturing and assembly, as you said earlier, Dave, that is all under consideration when we think about where the real cost efficiencies are going to be. One of the key places may be in the overall engagement model. The ability to bring a broad portfolio, package it up, and make it available to a customer with the appropriate set of services, and I think this is why you said services is still an opportunity. But what does it mean to get to the Dell EMC overall engagement model as Dell finds or looks to find ways to cut costs, to continue to pay down its debt and show a better income statement? >> Dave: So let me take the customer view. I mean, I think you're right. This whole end to end narrative that you hear from Dell, for years you heard it from HP, I don't think it really makes that much of a difference. There is some supply chain leverage, no question. So you can get somewhat cheaper components, you could probably get supplies, which are very tight right now. So there are definitely some tactical advantages for customers, but I think your point is right on. The real leverage is the engagement model. And the interesting thing from I think our standpoint is that you've got a very high-touch EMC direct sales force, and that's got to expand into the channel. Now, EMC's done a pretty good job with the channel over the last, you know, half a decade. Dell doesn't have as good a reputation there. Its channel partners are many more but perhaps not as sophisticated. So I think one of the things to watch is the channel transformation and then how Dell EMC brings its services and its packages to the market. I think that's very, very important for customers in terms of reducing a lot of the complexity in the Dell EMC portfolio, which just doubled in complexity. So I think that is something that is going to be a critical indicator. It's an opportunity, and at the same time, if they blow it, it's a big threat to this organization. I think it's one of the most important things, especially, as you pointed out, in the context of cost cutting. If they lose sight of the importance of the customer, they could hit some bumps in the road and open it up for competition to come in and swoop some of their business. I don't think they will. I think Michael Dell is very focused on the customer, and EMC's culture has always been that way. So I would bet on them succeeding there, but it's not a trivial task. >> Yeah, I would agree with you. In fact, one of the statements that we heard from Michael Dell and other executives at Dell EMC at VMworld, over and over and over again, on theCUBE and elsewhere, was this notion of open with an opinion. And in many respects, the opinion is not just something that they say. It's something that they do through their packaging and how they put their technologies into the marketplace. Okay, guys, rapid fire, really, really, really short answers. Let's start with the threats. And then we'll close with the positive note on the strengths. David Floyer, really quick, biggest threat that we're looking at next week? >> The biggest threat is the evolution of ARM processes, and if they keep to an Intel-only strategy, that to me is their biggest threat. Those could offer a competition in both mobile, increasing percentages of mobile, and also also in the IOT and other processor areas. >> Alright, George Gilbert, biggest threat? >> Okay, two, summarizing the comments I made before, one, they may not be able to get the cloud vendors to adopt pools of their scale-out infrastructure because the software companies may not be ready to take advantage of it yet. So that's cloud side. >> No, you just get one. Dave Vellante. >> Dave: Interest rates. (laughing) >> Peter: Excellent. Stu Miniman. >> Stu: Software. >> Peter: Okay, come on Stu. Give me an area. >> Stu: Dell's a hardware company! Everything George said, there's no way the cloud guys are going to adopt Dell EMC's infrastructure gear. This is a software play. Dell's been cutting their software assets, and I'm really worried that I'm going to see an edge box, you know, that doesn't have the intelligence that they need to put the intelligence that they say that they're going to put in. >> So, specifically, it's software that's capable of running the edge centers, so to speak. Ralph Finos. >> Ralph: Yeah, I think the hardware race to the bottom. That's a big part of their business, and I think that's a challenge when you're looking at going head on head, with HPE especially. >> Peter: Neil Raden, Neil Raden. >> Neil: Private managed cloud. >> Or what we call true private cloud, which goes back to what Stu said, related to the software and whether or not it ends up being manageable. Okay, threats. David Floyer. >> You mean? >> Or I mean opportunities, strengths. >> Opportunities, yes. The opportunity is being by far the biggest IT place out there, and the opportunity to suck up other customers inside that. So that's a big opportunity to me. They can continue to grow by acquisition. Even companies the size of IBM might be future opportunities. >> George Gilbert. >> On the opposite side of what I said earlier, they really could work with the data management vendors because we really do need scale-out infrastructure. And the cloud vendors so far have not spec'd any or built any. And at the same time, they could- >> Just one, George. (laughing) Stu Miniman. >> Dave: Muted. >> Peter: Dave Vellante. >> Dave: I would say one of the biggest opportunities is 500,000 VMware customers. They've got the server piece, the networking piece kind of, and storage. And combine that with their services prowess, I think it's a huge opportunity for them. >> Peter: Stu, you there? Ralph Finos. >> Stu: Sorry. >> Peter: Okay, there you go. >> Stu: Dave stole mine, but it's not the VMware install base, it's really the Dell EMC install base, and those customers that they can continue moving along that journey. >> Peter: Ralph Finos. >> Ralph: Yeah, highly successful software platform that's going to be great. >> Peter: Neil Raden. >> Neil: Too big to fail. >> Alright, I'm going to give you my bottom lines here, then. So this week we discussed Dell EMC and our expectations for the Analyst Summit and our observations on what Dell has to say. But very quickly, we observed that Dell EMC is a financial play that's likely to make a number of people a lot of money, which by the way has cultural implications because that has to be spread around Dell EMC to the employee base. Otherwise some of the challenges associated with cost cutting on the horizon may be something of an issue. So the whole cultural challenges faced by this merger are not insignificant, even as the financial engineering that's going on seems to be going quite well. Our observation is that the cloud world ultimately is being driven by software and the ability to do software, with the other observation that the traditional hardware plays tied back to Intel will by themselves not be enough to guarantee success in the multitude of different cloud options that will become available, or opportunities that will become available to a wide array of companies. We do believe the true private cloud will remain crucially important, and we expect that Dell EMC will be a major player there. But we are concerned about how Dell is going to evolve as a, or Dell EMC is going to evolve as a player at the edge and the degree to which they will be able to enhance their strategy by extending relationships to other sources of hardware and components and technology, including, crucially, the technologies associated with analytics. We went through a range of different threats. If we identify two that are especially interesting, one, interest rates. If the interest rates go up, making Dell's debt more expensive, that's going to lead to some strategic changes. The second one, software. This is a software play. Dell has to demonstrate that it can, through its 6% of R and D, generate a platform that's capable of fully automating or increasing the degree to which Dell EMC technologies can be automated. In many conversations we've had with CIOs, they've been very clear. One of the key criteria for the future choices of suppliers will be the degree to which that supplier fits into their automation strategy. Dell's got a lot of work to do there. On the big opportunities side, the number one from most of us has been VMware and the VMware install base. Huge opportunity that presents a pathway for a lot of customers to get to the cloud that cannot be discounted. The second opportunity that we think is very important that I'll put out there is that Dell EMC still has a lot of customers with a lot of questions about how digital transformation's going to work. And if Dell EMC can establish itself as a thought leader in the relationship between business, digital business, and technology and bring the right technology set, including software but also packaging of other technologies, to those customers in a true private cloud format, then Dell has the potential to bias the marketplace to their platform even as the marketplace chooses in an increasingly rich set of mainly SaaS but public cloud options. Thanks very much, and we look forward to speaking with you next week on the Wikibon Weekly Research Meeting here on theCUBE. (techno music)

(light music) >> Hi, I'm Stu Miniman here at theCUBE studio in Palo Alto in the center of Silicon Valley. Happy to welcome back first of all a many time guest at theCUBE, Kevin Deierling with Mellanox, and also someone I've known for many years, but the first time we've actually gotten under the lights in front of the cameras, Marty Lans with Hewlett-Packard Enterprise. Here to talk a lot about networking today and not just networking but storage networking. So, you know, kind of one of the dark corners of the IT world that... There's those of us that have known each other for decades it seems. And, but you know, pretty critical to a lot of what goes on in the environment. Kevin, you know, let's start with you. You know, we've caught up with Mellanox a bunch. Obviously we do a lot of video with HPE. We'll be at the Discover show in Europe coming soon. But why'd you bring Marty along to talk about some of this stuff? >> Yeah, so HPE has been a long-time partner of Mellanox. We're really not necessarily known as a storage networking company, but in fact we're in a ton of storage platforms with our InfiniBand. So, we have super-high quality reliability. We're built into the major storage platforms in the world and Enterprise Appliances, and now with this new work that we're doing with Marty's team and HPE, we're really building what we consider to be the first Ethernet storage fabric that will scale out what we've done in other worlds with dedicated storage platforms. >> Okay, Marty, before we get into some of the things you're doing with Mellanox, tell us a little bit about your role, how you fit inside Hewlett-Packard Enterprise as it's made up today. >> I'm responsible for storage networking, or the connectivity for storage as well as our interoperability. So if you think about it, it's a very broad category from a role perspective. We have a lot of challenges with all the new types of storage technologies today. And that's where Mellanox gets to come in. >> So just elaborate a little bit. What products do you have? NICs and host bus adapters, switches, what falls under your purview? >> Pretty much everything, everything you just mentioned. We carry traditionally, all the traditional storage connectivity products, Fibre Channels, switches, adapters, optics cables, pretty much the whole ecosystem. >> So what we're talking about is the Ethernet storage fabric. So can one of you set it up for us, as to what that term means? And we talked about Fibre Channel. Fibre Channel is a bespoke network designed for storage, a lot of times run by storage people or storage networking people underneath that umbrella. What's happening with the Ethernet side? >> Yeah, I think when you look at the traditional SAN network it was Fibre Channel and the metrics that people evaluate that on are performance, and reliability, and intelligence, storage intelligence. Today when you look at that on all those metrics Ethernet actually wins. So we can get three times the performance for 1/3 the price. Everything is built in in terms of all of the new protocols like NVMe over Fabrics, which is a new one that's coming. Obviously iSCSI. And taking some of the things that we do in terms of intelligence, like RDMA, which is RoCE over Ethernet, that's what really enables NVMe over Fabrics. We have that end-to-end supply of switches, adapters, and cables. And working with HPE, we can bring all of the benefits of the platform that they have and all of the software to that world. Suddenly you've got something that's unmatched with Ethernet. And that's the internet storage fabric. >> So Marty, one of the things I've said a bunch over the last couple of years is nothing ever dies. But Fibre Channel, it's dead, right? Isn't that what this means? Why don't you help us a little bit with the nuance of what you're seeing, what customers are asking, and of course there are certain administrators that are like, I know it, I love it, I'm going to keep buying it for years. >> I guess Fibre Channel's still alive. It's doing very well. I think from a primary storage perspective, I mean that's where Fibre Channel is used, right? Today's storage has a lot of different technologies. And I like to look at this in a couple of ways. One, you look at the evolution of media. You're going from disk, we went from tape to disk, and now we're going from disk to Flash. And Flash to NVMe. And now we have things like performance and latency requirements that weren't there before. And the bottleneck is moved from the storage array to the network. So having a network that creates great latency is really the issue at stake. We have latency road maps. We don't have performance road maps from a storage perspective. So that's the big one. >> Kevin, I'm sure you want to comment on some of the latency piece. That's Mellanox's legacy. >> So with some of the things we're doing now, NVMe over Fabrics, we're adding 10 microseconds of latency. So you've got an NVMe Flash drive. When it was spinning rust, and it took 10 milliseconds, who cared what the network added? Today you really care. We're down to the tens of microseconds to access an NVMe Flash drive. When you move it out of the box, now you need to network it. And that's what we really do, is allow you to access NVMe over Fabrics and iSCSI and iSER and things like that in a remote box and you're adding less than 10 microseconds of latency. It's incredible. >> Yeah, Marty, I think back. Even 10 years ago, there was a lot of times, okay, do I want InfiniBand, do I want Ethernet, do I want Fibre Channel? And there were more political implications than there were technical, architectural implications. I said five years ago, the storage protocol wars are dead. That being said, it doesn't mean that we're still sorting those out. What do you hear from customers? Any more nuance you want to give on that piece? Architecturally, right, Ethernet can do it all today, right? >> Sure, yeah, yeah, it is. So I think those challenges are still there. You still have that... you mentioned political, and I think that's something that's still going to be there for quite some time. The nice thing we did with Mellanox, and what we did in our own technology for storage connectivity, we innovated in an area that I think really hasn't been innovated that was ripe for innovation. So creating an environment that gives the storage network administrator the same capabilities of what you get in Fibre Channel we can do on an Ethernet network today. >> And Marty, one of the things. When we get a partnership announcement like this, bring us inside. Talk to us about what engineering is being done. How is this more than just sticking a lovely new logo on it? What development, what's HPE been bringing to this offering? >> So we did, first when we started, before we get to the Ethernet side, we built something called Smart SAN. It's automation orchestration for Fibre Channel networks. And that was a big success. What we did after that was we looked at it from the Ethernet perspective. We said why can't we do it there? It's in-band, it's real-time access, and it gives you the ability to do all the nuances of what makes Ethernet hard. Automate and orchestrate all the Ethernet capabilities to behave much like a Fibre Channel network. So this is a four- to five-year development cycle that we're in, in terms of developing these products. And sitting down with Mellanox, this is not just a marketing relationship. There is a lot of engineering development work that we've done with Mellanox to storage optimize their products. To make them specifically designed to handle storage traffic. >> Kevin, it's interesting. I think back to, let's say the big other Ethernet company. When they got into Fibre Channel, they learned a lot from the storage side that they drove into some of their Ethernet products. So you kind of see learning going back and forth. It's a small industry we have here. What did HPE bring to the table, and more importantly, what's the latest as to what makes the Ethernet storage fabrics... What's going to move the needle on some of that storage adoption? >> I think the key thing is, as Marty said, if you look at it you've got to be able to be familiar with all of the same things. You need to provide the same level of protection. So whether you're using data center bridging to have a lossless network. We have zero packet loss switches, which means that our switches don't drop packets under the cases where you've actually over-subscribed a network. We can actually push back, we can use PFC, we can use ECN. All of that, and on top of that, what's happened is the look and feel to be able to manage things just like it's Fibre Channel. So all that intelligence that HPE has invested in so much over the years is now being brought to bear on Ethernet. One of the big things we see is in the cloud, people have already moved to a converged network where you're seeing compute and networking and storage all on the same fabric. And really that's Ethernet. And so what we're doing now is bringing all of those capabilities to the enterprise. So we think that 15 or 20 years ago there was really no choice. Fibre Channel was absolutely the right choice. Now we're really trying to make it as easy as possible to make that enterprise transformation to be cloud-like. >> It's funny. Marty, you and I worked for EMC back when that storage network was being designed. Architecturally, those of us who have been in networking since before Fibre Channel, we would have loved to do it with Ethernet, but there were limitations with CPU, the network itself. It would have been nice. But fast forward, it was like, Flash had been around for a long time before, oh wait, now it's ready for enterprise. Now it feels like Ethernet has gone through a lot of that journey. You're welcome to comment on that. But the question I want to have from the storage side, we're going through so many changes. HPE has a very large portfolio, a number of acquisitions as well as many things HPE's doing. We talked about NVMe, NVMe over Fabric, we talked about hyper-converge, we talked about scale-out NAS. Networking is not trivial when it comes to building out distributed architectures. And of course storage has very particular requirements when it comes to network. So what are you hearing from your customers from the storage side of the business? How does HPE pull those pieces together and how does this Ethernet storage fabric fit into it? >> I mentioned it earlier. We talked about the primary array being Fibre Channel. If you take a look at where storage has gone, you talk about the cloud, you talk about all these big data, now you've got secondary storage, you've got hyper-converged storage, you've got NAS scale-out, you've got object. I mean, you go on and on. And all these different storage technologies are representing almost 80% of all the data that's out there. Most of that data, or all that data, now that I think about it, is connected by Ethernet. Now what's interesting is, from our perspective, is that we have a purview of all that capability. I see that challenge that customers are having. And the problem that these customers are finding is they go through the first layer of the challenges which is the storage capabilities they need in these storage technologies. And then they get to the next layer that says oh, by the way, the network isn't that great. And so this is where we saw an opportunity to create something that created the same category of capabilities as you got in your primary to the rest of the storage technologies. They're already using Ethernet. It's a great opportunity to provide another dedicated network that does connectivity for all those other types of storage devices, including primary. >> Is there anything along the management of these type of environments? How similar, how much retraining do you need to do? If your customers are probably going to manage both for a while. >> From a usability perspective, it's quite easy. I think what customers are going to find. We use Fibre Channel as the lowest common denominator in terms of everything has to meet, the Ethernet network has to meet those kind of requirements. So what we did was we replicated that capability throughout the rest. With our automation orchestration capabilities it gives us the feature. From a customer perspective it's really a hands-off kind of solution. It's really nice. >> The other piece is... Kevin, how's the application portfolio changing? You mentioned a little bit, some of those really specific latencies that we have. What are you seeing from customers from the application portfolio? David Floyer from Wikibon has been talking for a long time. HPC is going to become mainstream in the enterprise which seems to pull all of these pieces together. >> That's Mellanox's heritage. We came from the InfiniBand world with HBC. We're really good at building giant supercomputers. And the cloud looks very much like that. And when you talk about things like big data, and Hadoop, and Spark, all of these activities for analytics, all these workloads. So it's not just the traditional enterprise database workloads that need the performance, but all of these new data intensive. And Marty really talked about the two different elements. One was the faster media, and the second was just the breadth of the offering. So it's not just primary block storage anymore. You're talking about object storage, and file storage, and hyper-converged systems. We're seeing all of that come into play here with the M-series switches that we're introducing with HPE. What's happening now is you've got a virtualized, containerized world that's using massive amounts of data on superfast storage media. And it needs the network to support that. All of the accelerations that we've built into our adapters all of the smarts that we're building into the switches and taking all of this management framework and automation that HPE's delivering, we've got a really nice solution together. >> Excellent. One thing I love when we talk networking here, is the containerized world, we're talking about serverless, some of this stuff is trying to explain it in a way that people can understand. Marty, an M-series is probably boxes. There's actually physical... You can buy the software, and everything critically important. Walk us through the product line and what sets it apart from what you've done before and what makes up the product line there. >> A lot of compliments to Mellanox and the way they've designed their products. We have, first and foremost I'd like to call out they have a smaller product that we're working with from an ASIC perspective. It's the 2100 series. It's nice because it's a half-width box. It allows you to get full redundancy on a single 1U tray if you want to think about it that way. From a real estate perspective it's really nice. And it's extremely powerful. So with that solution, you have the power and the cost savings being able to do what many different networks can do at three times the cost in a very small form factor. That's very nice. And with the software that we do, we talked about what kind of automation we have. It's all the basic stuff that you'd imagine like the discovery, the diagnostics, all the things that are manual in an Ethernet world we provide automated in a storage environment. >> What about some of the speeds and feeds? We've got so many different flavors of Ethernet now. I remember it took a decade for 10-gig to go from standards to most customer doing now. It wasn't just 40 and 100, but we've got 25 and 50 in there. So all of them, are there interoperability concerns? Any things that you want to say, yes this, or not ready for that? >> I'll say that the market has diverged on many different speeds and feeds. So we do support all of them in the technology. Even from a storage perspective, some of our platforms support 25 gig, some will support 40 gig. So with a solution, we can do one, we can do 10, 25, 40, 50, 100. What's nice is it gives you, regardless of what technology you're using you have the capability to use the technology. >> Kevin, I want to give you the opportunity. What are you hearing from the customers these days? What are the pain points? It used to be some of those speeds and feeds. Wait around, when can I do the upgrade? It's something that's a massive thing that we have to undertake from the backbone all the way through. So are we moving faster? I know we all talk, it's agility and speed, but how about the network? Is it keeping up? >> Yeah, I think we are keeping up. The thing we hear from customers is about efficiency of using their platform. So whether it's the server or the storage. And the network they don't want to be in the way. So you don't want to have stranded assets with an NVMe drive stuck inside of a server that's run at 10% and you've got another unit that's at 100% and needs more. And really that's what this disk aggregation and software-defined storage is all about is taking advantage and getting the most out of the infrastructure that you've invested in. One NVMe drive can saturate a 25-gig link. So we have people that are saying give me more bandwidth, give me more bandwidth. So we can saturate with 24 drives, 600-gig links. The bandwidth is incredible, and we're able to deliver that with zero packet loss technologies. So really that's what people are asking for. There's more data being generated and processed and analyzed to do efficient business models, new business models. And they don't want to worry about the network. They want it to configure itself automatically, and just work and not be the bottleneck. And we can do that. >> Marty, can you up-level for us a little bit here? When I think about HPE, it comes pre-configured, I know. That's what I've known HPE for. Of course HP for most of my career. Even back in some of the earliest jobs, it's like well, rack comes fully configured. Everything's in it. When I look at this announcement, HPE, server, storage, network, some of your pieces. What's important about this? How does this fit in to the overall picture? >> Customers are used to having that service level from us. Delivering those kind of solutions. And this is no different. We saw a lot of challenges with all these different types of networks. The network being the challenge with these new types of storage technologies. So having these solutions brought to you in the way that we've done with the primary storage array I think is going to make customers pretty happy about it. >> Kevin, want to give me the final word? What should we look for in this announcement? Any last things that we haven't covered? And what should we look for for the rest of 2017? >> I think as Marty said, this is a beginning. We have a strong relationship with HPE on the adapter side, on the cables, on the switches. Also on the synergy platform that we've done the switch for that as well. So 25, 50, 100-gig is here today. With shipping we're really saying 25 is the new 10. Because this faster storage needs faster networks and we're here to deliver. I think, pay attention, we're going to do some new things. There's lots of innovation coming. >> Kevin Deierling, Marty Lans, thanks so much for bringing us the update. And thank you for watching theCUBE. I'm Stu Miniman. (light music)

>> Announcer: Live from Washington, D.C. It's theCUBE covering DotNext Conference. Brought to you by Nutanix. >> Welcome back to the district everybody, I'm Dave Allante with Stu Miniman, and this is theCUBE, the leader in live tech coverage. We go out to the events, and we Extract the Signal from the Noise. We're here, this is day two of the Nutanix.NEXTConf, #NEXTConf, Chris Hsu is here, sorry Calvin Hsu is here, VP of Product Marketing at Citrix. Welcome to theCUBE. >> Thank you very much, nice to be here. >> So, you're up on stage earlier today right? A lot of good action here at the show. Talk about Citrix, and what you guys are doing here. >> Yeah, so I think Citrix, Nutanix, we've had a partnership going back for quite awhile. I think what really brought us together were customers that were actually trying to solve this issue, of how do I implement VDI, and how do I do this better right, there has to be a better way. And it's funny, we were just talking about chatting a little bit before about how many different infrastructure pieces and how many different components there are to learn in order to do VDI, and that was one of the things that always kind of stood as a barrier to adoption in some of the early days, going back, I don't know several years now, and they would say, well, you got to have, be an expert in networking, you got to be an expert in storage, you got to know all the server side infrastructure, the virtualization that goes with it, and then you got to also know the desktops, and the app parts of it, and how to manage all that. And in my experience it was all that technical knowledge, but it was also, it was also the people right? So, you also had to bring those people to the table, have one VDI project, go in and talk to a customer, and we're going to do a pilot for 200 people to start, and there'd be 20 people in the room. Because everybody had different areas of responsibility. And so as Nutanix is involved, and the whole idea of hyper-conversion, and HDI that's come around, that's really been some of the basis of where VDI is kind of getting that second booster of, in it's life cycle here, where they're realizing that it could just be a few people that are responsible for that HDI infrastructure, can deploy the VDI, and now they have a more simple reliable way of implementing that solution so (mumbles). >> I mean, that's kind of where, even when I go back to the converged infrastructure world that's, VDI was the one like foothold use case with Vblock's in the early days, and the HPE stuff, or HP then, and you know I have to say, I have to ask both of you guys, because you know this business really well, and you're obviously a VDI expert but, when you talk to customers, they get really excited about VDI, they're like, "Hey, this is a great use case, "we're going to, we're doing VDI, VDI, VDI, "it was a big project effort." When you talk to the analysts they're like, "Uhhh, VDI is so boring." What is it about VDI that there's this bifurcated opinion base right? Analysts uhhhh, okay, but customers eat it up. What's going on, what...? Unpack that for us. >> Well, I mean analysts don't necessarily feel the day-to-day pain of managing a desktop right? That's what it is right, so for them it's a-- >> Well said. >> It's the truth. Well, actually I know, I know some analysts that actually did that job, and so they're the ones that are still excited about it right? But in general, like once you get past the idea of that consulting a client on the complexities, and how do you choose a vendor and, and then it comes down to a few basic things, it's which one's going to deliver the best employee experience with the solution, which one's going to be the best operationally to manage and then sort of their job is done. But then, from a IT Admin perspective it's like they're still, every day they're managing new application update, the new desktop image, and it doesn't end right? And that's dozens and dozens of hours out of every week, every month, that you spend. >> Alright let's hear from the analyst. >> Dave, it was called VDI fatigue. Every year was the year of VDI you know. I think we've gotten beyond that, because I tell you, from my viewpoint, it was wait. It was this mess of a stack, and we're going to fix that. Oh wait, now storage is the mess, now flash is going to solve that, oh wait, mobile adoption is you know, the barrier, yet the opportunity, how do we modernize our applications, the changing workforce, mobile workforce. There were always the next, the next, the next, the next, the next thing and, it reminds me of our conversations with (mumbles) you know, it was like we're never finished, and a lot of it was, it was this big category of you know, you talk about the user experience, is I think, what Citrix is focused on, and how do we make that simpler and you know, so many analysts... The other thing from an analyst is, most analysts focus on a piece of it, and this is very different. I know some analysts focus on like, user experience, and let's look at the application, that's probably closer to where VDI is then, right, if you ask the storage guys they're like ah, VDI. If you ask the desktop people they're like wait, my place is fine so, it's that, it was a really complicated problem, but it's very different today, than it was, and I have to think with Nutanix it is, must've changed in the last five years. >> Absolutely, and well, I think the other thing is that's funny is if you take it back to like 2008 right? Analysts called the VDI game really early, so it's like you're saying every year was the VDI. Before anybody was deploying it in any sort of size, they were already saying it's a, X gazillion billion dollar market and that, and it, I think it's taken awhile for the customers... The customers are still just trying to dealing with some very basic desktop management issues today, and they're probably lagging behind the industry and analysts by three to five years I'd say, right? But what I hear now is, Windows 10 is coming around the horizon, how am I going to manage Windows 10 updates? I've got an Office 365 deployment project on my hands, how am I going to get this all out, how am I going to get the functionality that every one of my end users needs? And it comes around and it's like VDI is a great answer for that, it's a great way to solve that issue. >> Calvin, one of the things that we hear from new (mumbles) customers I mean, they love that kind of one-click simplicity, one-click update, and I hear about you know, Windows 10 is like the roll-out of the next thing, and where things break. How are Citrix and Nutanix working together to solve some of these challenges? >> Yeah, I think that approach of one-click, the automation you know, both the blue-printing types of technology is what we're pulling together. All that sort of automation is really important for, for this type of environment. You know I think the, we're both willing to pull together solutions that really then, drive that simplicity for, for both the infrastructure and the management, ongoing of that solution. It's like for example, we're working together on, work on the district's workspace appliance right? And that's, for us it's not a product name that's really a program, it's a way of defining HCI infrastructure like Nutanix and they're jumping on board with this. To be able to point that thing at the Citrix Cloud, and then download all the resources that it needs in order to run a Citrix workload on it. So it's a very automated way of getting stood up, so that not only is it deployment of the infrastructure, automated and simple, but placing that workload on it, and getting it set to manage, and then even running it and operating it is more like running and operating a Cloud service than it is even operating a local infrastructure for it. >> One of the things that David Floyer from Wikibon, has done a lot of analysis saying, if we can get to basically a single-managed entity is where he calls it, so I can have the entire thing comes out, not just the infrastructure, but all the way through the stack. Not only does that really help your deployment, but the overall kind of time-to-value, customer experience is just tremendously improved, tell us how you're helping to kind of reach that vision. >> Yeah, well I think it's time-to-value, but it's also making VDI accessible to more customers right, and more segments of the market. The types of things that VDI solves, security, manageability, those aren't just enterprise problems right? Even midsize companies, they have security concerns, and for them it's actually probably even more dramatic, like they have a breach there, and it's catastrophic for the company, not just, you know we're delayed by a few hours. And so you know, having that simplicity, and then making that whole thing easier to deploy, and faster, it's not just easier to deploy, but on day two, it's easier to manage ongoing. Those things are getting into tension again. >> So for years I remember in the Citrix, Synergy, a bunch of VMware, VM world's, talked to customers, and it was always a two-horse race between those two companies, and Citrix was like Secretariat, and VMware was like Devil His Due. You've probably never heard of Devil His Due. Pretty good horse but not Secretariat, and you guys, Citrix was the dominant player in that marketplace. What's the competitive situation today? It seems like VMware has made some acquisitions, has maybe caught up, maybe has some advantages, what, how do you see them as a competitor? >> I, so I think where Citrix is, I think that what really happens in the competitors space now is that it becomes less about VDI, versus VDI, and like what features are in each one. Although I could talk for hours, I think there's still a bunch of differentiation in there. You know earlier talking about user experience, I think the way we're looking at this market, and what's happening to it right now, is less about sort of user experience in the sense of a classic protocol versus protocol sense, in a technical sense, and more about, and I'll use the term more and more often about employee experience, alright, so it's not just what is the performance of my virtual desktop when I'm on x-y-z device, over a certain network. It is what happens that first time I give an employee a resource, or a virtual desktop, or a mobile application, or access to a SAS application, or an internally-hosted Web application through a virtual browser, and they go in and they, they want to get work done right? So the experience of that employee is now, not just one of these technologies, it is what we refer to as workspace technology. It's everything I need from the applications, to the files that I want to use, to the workflows that I want to kick off, and I think that will be their new area of differentiation, and again, that's where we want to move very far for. >> Calvin, what should we be expecting to see from Citrix and Nutanix going for a long partnership, and how does it improve even more for customers? >> I think you know, the stuff that Nutanix has announced here, with the whole Hybrid Cloud strategy, I think that very much is in alignment with our philosophy on Hybrid Cloud approaches for customers. So I would expect to see a lot more in that collaboration area. There's lots more that we can do on the NetScaler side of the business for networking, and enabling the reliability of a lot of these network connections as people become, you know I love that concept of the core, the distributing the Edge Cloud right, and all of that's going to need interconnectivity, and security and reliability. And you know, more of the same on making VDI simpler for, for all customers of all sizes. I think we're just at the cusp of you know we've got this automation plan going in, we're creating the workspace appliance in its simplicity there. I think there's a lot more we can do, again, from day two perspective operationally, as I keep going and I'm growing this thing, and I'm managing my images, and I'm managing applications, and growing the infrastructure, increasing performance, taking on different types of workloads, there's lots more we can do in that area. >> What is the all Citrix Stack Workplace Appliance? >> Right, so that is really the Nutanix has announced support for XenServer, and for us, you know XenServer, we've really done a transformation of that technology over the last couple years, where we've taken what was a general platform virtualization solution, and we've really specifically targeted at our workloads. At XenApp, XenDesktop, NetScaler, and making it the best virtualization platform for our, for our solutions. Why do we do that? We do that because there's going to be certain things that we need out of that layer from an innovation standpoint whether it's supporting graphics, which we were the first to do, across all the major ship vendors, virtual GPUs, coming up with new security paradigms like being able to do deep Hypervisor Introspection, and identify day one malware attacks before they, even infect any of the machines. You know, those sorts of innovations become really important that we can drive, and having control over XenServer we're able to do that. So through the partnership with Nutanix, and getting their support on that as well, then all the joint Nutanix and Citrix customers could take advantage of that innovation. So now they also have the obviously at their disposal, everything that Nutanix is putting into HV, everything we're putting into XenServer, and being able to manage it that way. So, in the workspace appliance, sort of reference guide for building this, one of the things we focus on is the XenServer component of it, and being able to have that innovation coming from Citrix as part of that solution. >> Great. Calvin, thanks very much for coming to theCUBE, appreciate your time, and your insights. >> Thank you, yeah it's good to be here. >> Good to see you. Alright, keep it right there buddy, Stu and I will be back with our next guest. We're live from DotNext, #NEXTConf, this is theCUBE. (techno music)