(futuristic techno music) >> Narrator: Live from San Francisco, celebrating ten years of high-tech coverage, it's theCUBE! Covering VMworld 2019. Brought to you by VMware and it's eco-system partners. >> Good morning, welcome to day three of our coverage here on theCUBE of VMworld 2019. We're at Moscone Center North, here in San Francisco. Kind of a, well not kind of, it's a really cloudy day but I kind of expect that. We've been talking about clouds all week, right? Multi, hybrid, public, private, you name it, we've been talking about it. John Walls and Dave Vellante, good to see you this morning. >> Good to see you John. >> Yep. We're joined now by a couple of executives from Kaminario. Josh Epstein, who's a CMO and Eyal David who's the CTO of Kaminario. Good morning gentlemen, >> Good morning, >> Morning. >> Great to be here, great to be here. First of, let's just talk about the show. I know you've got a presence down on the floor, just your feeling about the traffic, the kind of traffic you're seeing at your booth, what the questions are, coming from customers, maybe what those answers are. Eyal, why don't you jump on that? >> Yeah, so first of all, it's great to be back in San Francisco for this conference! >> John: Here, here! >> Dave: Agreed! >> Definitely. (laughter) And I think it's very clear that, yes definitely, cloud is the name of the game, and especially how do you implement a hybrid cloud, customers are all on their cloud journey, and the big question is, "How do I do that?" "How do I take these new technologies, the cloud, "containers, and how do I take my applications "and my data services to the next step?" And it's kind of all over the place, all decisions, all the customers are asking about, this is where the focus is, where the interest is, and it's a great to be in the center of all of that. >> Yeah, you made a big decision, or a big announcement about a month ago. You said, "Okay, public cloud; that's where we're going." Josh, the driver behind that and kind of, what the early fall outs were? >> Sure, sure. I mean, we started our journey, really from the beginning of Kaminario, Kaminario's about ten years old, and you know, the data storage market, as a traditional all-flash storage array. The past 24 months, we've really pivoted the business model towards first, 100% software, we got out of the appliance business, started really focusing our business on doing these large software based implementations, moving into more subscription based revenue, kind of delivering that cloud based economics experience. And then, over the last several months, we've been focusing on taking our core architecture, which fundamentally decouples the data services from annoying infrastructure, and thinking about how that might actually look on public clouds. So doing the same thing, kind of creating this sort of shared storage experience, delivering all the traditional enterprise class data services, but sitting on public cloud infrastructure. It's been a really interesting journey. >> So let's double click on that, because it's clear that this space is not about the media, it's about the business model, it's about the additional value you can add for customers, so maybe you could add a little bit of color, as to sort of, how's that going, where you guys are differentiating in the marketplace, where you're winning. >> Sure, I mean I think- >> Yeah. >> Jump in, Eyal. >> Yeah, so I think it's, as you said, it's not about the media, it's all about how do you help customers have a uniform experience around any deployment model. So they want to deploy on-prem, they want to deploy in the cloud, they are actively seeking for a uniform way to do that without too much heavy lift. There's some challenges in going to the cloud. If you are not born in the cloud, you need to re-architect your applications, you need to kind of, learn some new skills. There's a big challenge, especially if you have big data intensive applications. That's where we focus, delivering that uniform experience around orchestration of resources and data services across your on-prem, off-prem and public cloud implementations. >> So you guys decided not to ship a box anymore, you know the Silicon Valley show, "Where's the box?" so I'm interested in the technical challenges of doing that, but also the customer feedback, because sometimes people want an appliance, so how were you able to transition through that and what's the feedback been? >> Yeah, I think for us, I mean, our core business, our core customer, has really been cloud scale applications, for the last five years. So this is large SAAS providers, e-commerce platforms, fintech, healthtech, any of these large, mature software companies, right, their core business is delivering a cloud scale application. And for them, you know, many of them were born before the age of the public clouds, they've actually heavily invested in application architectures that rely on enterprise class and shared storage. That said, they see the draw towards the cloud, they see the benefit of the cloud like economics, subscription based, consumption based economics, and then the overall capability to scale up and scale down like the cloud does, but that said, they need that bridge, from where they are today, with traditional data centric architectures to this cloud world. >> You mentioned fintech, and there's an interesting case, because when the cloud really started to gain momentum, a lot of financial services companies, the big guys especially, said "You know, we can build our own clouds." And then they realized, "Well we can't build them as fast as Amazon can build them", and so they sort of pulled back on that. But they, and they sort of put their foot in the cloud, and then went all, and then they said, "Wait a minute." So what are you seeing, in terms of, call it the private cloud, you know, we've kind of swung back to that, is that gap closing, are they able to get close enough? The key part of that is obviously the pricing models, and the pay by the drink. I wonder if you could add some color to the on-prem cloud business- >> Josh: Sure. >> If we can call it that. Some people might object, but that's- >> Yeah, definitely. So the way we approach it is that we want to bring the simplicity, the agility and the flexibility of the cloud model to this on-prem data center, to deliver the same performance, control of a dedicated resource, which is exactly what these type of fintech customers are looking for. So, in our basic architecture, which was already, we decoupled from hardware, already decoupled performance from capacity, we're able to do that extremely flexibly. You can get the same flexibility of the cloud in an on-prem solution with all the benefits, and you can also decide, on your own pace, in your own terms, what you actually need and makes sense to run on a public cloud infrastructure. >> So scale is obviously a big deal for your customers, that's kind of been your focus since day one, what's the bell curve look like? Are we talking about scale in just the ability to scale quickly, or is it also the sheer size, and what does it look like? >> Yeah, I think it's about performance at scale, it's about control over performance at scale, it's about control over availability at scale, and it's obviously about cost at scale, right? I mean, it's too, there's so many different ways to look at the economics of public cloud versus on-prem. If you're looking at the pure dollar, it's clearly building on your own dedicated on-prem infrastructure, it's clearly cheaper than paying Amazon or Google or whoever to do it. But there's clear benefits to kind of going in that direction, in terms of agility, in terms of hands off management, in terms of really just, you know, staffing expertise. But I think it does come down to control, right? And when you talk about scale, when you talk about petabyte scale, it's easy to lose control, and this is the benefit of shared storage models, and this is where we think there's a real opportunity. >> Can I follow up on that, because you said there's a clear benefit of, if I understood it correctly, of building out your own prem infrastructure at some critical mass. There's obviously people, like Andy Jassy, who would disagree with that. So what's your data showing? I presume it's weighted towards large customers. >> Absolutely. >> Yeah. >> But maybe you can add some color to that? >> We've certainly got good research, good analysis on this. And I think if you're talking about, we're talking about certainly over 500 terabytes to a petabyte, it's a multi petabyte scale, data driven applications, we're talking about business critical applications, big block storage, heavy analytics. If you compare just raw economics, the thing is, there's a lot more than just the raw economics, but the raw economics of an infrastructure built on Kaminario versus the equivalent infrastructure, built on one of the block storage resources from one of the public clouds, it's literally about 1/3 the cost, to build out your own dedicated infrastructure, leveraging a good, high quality colo, a good, high quality hardware underneath it. So raw economics, it's clear where that sits. >> Okay, so that's if we're comparing the cost of the, the acquisition costs versus some end number of years, right? >> That's correct, yeah exactly. >> And not really going into the labor costs at that- >> Not going into the direct labor costs of managing the storage, yes, there's clearly interesting benefits to going to a 100% cloud model. What that does to an organization, when you kind of, hands off, you know, you don't have the same kind of in house IT resources, you're out sourcing a lot of that- >> Well except what Eyal was saying before, is that you're trying to bring that cloud model to the data. So to the extent that you can close that gap, then you can- >> Eyal: Differently. >> Substantially mimic, exactly. >> We saw the opportunity to extend those capabilities into the public cloud, delivering a high performance storage solution in the cloud today is as expensive. Our focus over the years, of taking these commodity components and comprising them into a high performance shared storage solution. We can do the same in the cloud. >> But I think the key is multi-cloud. >> Yeah, let's talk about that. >> The key is that there's not one size fits all, and it really is about creating this mobility between your on-prem data and public cloud number one, and then public cloud number two. One of the key concerns about moving a business critical application to a public cloud is lock in, right? And if you can create this infrastructure where you're decoupling that data services stack that the application relies on, from the underlying infrastructure, you get this mobility between clouds that becomes really attractive. >> So you're kind of answering the next question that was on my mind, of how are you selling that to customers. The fact that we're having this very robust discussion about this fundamental shift and you get it, because you're providing this service to your whole client base, but if I'm a client, my head's starting to spin a little bit, right? And I've got big decisions to make, so how do you sell that, that this is not a little shift, this is a fundamental way, the way you're going to do your business? >> So, in the simplest form, we tell the customers that we significantly lower the barrier of entry into the cloud. You don't need to re-architect everything, you don't need to be worried about performance management, or, control, or orchestrating resources; we do all that for you, and we do it in the same way that we did it for you in your own on-prem data center, and we can do it on any of the public clouds. So the barrier of entry, the risk of actually doing that transition- >> John: Is lowered. >> Is lowered significantly, and you can that on your own pace, in your own terms, and make some smart decisions later on about what needs to reside where over time. >> So, when we think about multi-cloud, we think about, "Okay, I'm going to have data on-prem, I might choose "Azure for my collaborative workloads, "I might put my dev stuff in AWS, "I might put some analytics in Google..." You know, whatever, my business is going to decide what to do, I'm not going to have this grand, multi-cloud strategy, it's just kind of going to happen. And then IT's going to be called in to clean up the crime scene! But we're envisioning this architecture that's shipping metadata, and maybe compute to the data, versus moving data. Do you agree with that, or do you see it differently? >> We see, I think, two types of customers. Some behave just as you describe, but some have a very specific decision not to be locked into single vendors. So they'll say, "I'll put one business unit on Google Cloud, "and put the other business unit on Azure. "I'll put this certain type of application on one cloud, "and the other type on the other cloud, "because I want to make sure that I am cloud agnostic. "I'm actually mandating with an organization that "I can run anywhere." >> As a hedge. >> As a hedge, as a definite hedge, because they are concerned about locking to either of the vendors, and in that sense, they later on make the decision, "Okay, where is the "core of the data? "Where is my mission critical data which always "has some gravity, and how do I make sure that it's in "the right place at the right time." >> Doesn't that add complexity for the client? I mean, if they've got a workload here, and here, and here, it'll be a lot easier if it was all here, or most of it were here. But that adds, I'm wondering if- >> You're absolutely right, but what we see is this rapid shift towards embracing the multi-cloud model. So let's take an example. You have a classic cloud scale application, and might have an active/active data centers in two parts of the United States, sort of serving up the production application. You have dev test requirements, so they want the ability to rapidly spin up an environment to mimic a problem or do some development. Public cloud's a great example for that. You have DR requirements, your back up requirements, they want to be backing up, they want the ability to rapidly spin up in instance, in a public cloud instance, and no matter what, within every organization somewhere, even in the most sophisticated IT organizations where they have tremendous control over the data centers, some C-level exec somewhere that says, "In five years, I'm 100% on public cloud. I want nothing." So you have to sort of service that element as well, and what we're doing is saying, "Listen, you can continue to focus on building out "a world class, next generation data center, "based on the NVMe, all NVMe fabric, "and still have the mobility to do certain things "in the cloud, and still have this path, "if it makes for your organization, "to migrate the entire thing to public cloud, "and not get locked in." They'd be able to sort of, surf the clouds as actually- >> So technically, that means you have to speak as your API, S3, whatever language of the cloud, and so I'm trying to understand, sort of, technically, what you have to do, and then where you add value, where you pick up from whatever, VMware or whomever else is trying to be the control plane. >> So then, that is exactly the point, and to address the question about what the complexity of this multi-cloud world, this is exactly where we see the rise of this next generation orchestration framework, either from VMware or from others, that strive to give you this uniform experience. So we deliver that at the data services layer, we connect that to the orchestration layer, that allows you do seamless workload abilities, seamless data mobility to wherever it makes sense for those applications or business workloads to run. And basically, the customers expect, to date, that we encapsulate all that complexity for them. They want to be able to put their Google, Amazon or Azure credentials , and then forget exactly where it went. And this is a lot of what's going on in the floor this week, and that's exactly where we connect to the rest of that orchestration scene within the data center or the public cloud. >> So, in that context, are you primarily, I know you sell to a lot of different people, but is it the cloud architect, or the architect that's actually determining that throughout the organization, or is it again, cleaning up the crime scene type of a thing? >> It's usually a conversation with that CIO, who's kind of, on that cloud journey, building his cloud strategy, and even if he made the decision to in five years be in the cloud, now the question is, "Okay, what's happening in the meantime? "How do I actually do that?" >> One of the cool things that's happening in the meantime is most of our customers are in just this perpetual state of data center consolidation, right? Most of these large SAAS companies, they're growing through acquisition, they've got nine data to data centers, they all have a plan within two or three years to be consolidated on three next generation data centers and then have cloud mobility. So what we're able to do, this is leveraging our software model as well, is say, "Listen, let's do an enterprise wide, "unified licensing scheme, "where you're paying on consumption, "based on actual data stored, "and then you can build the underlying infrastructure "wherever you want. "You can base it on your traditional infrastructure "you might already own, it might be on next generation "NVMe, NVMe over Fabrics connected data centers, "and then a piece of it now might be in the public cloud." >> So, you're talking CIO, Dave, you're talking CSI, I'm just little confused! (laughter) Gentlemen, thanks for the time, we appreciate it. Great discussion, and continued success downstairs and on down the road. >> Great to be here guys, thank you. >> All right, back with more VMWorld 2019, here on theCUBE. (futuristic techno music)

>> Announcer: Live from Las Vegas, it's theCUBE! Covering VMworld 2017! Brought to you by VMware and its ecosystem partners. (futuristic music) >> Welcome back everyone, we are live, here, in Las Vegas for VMworld 2017, I'm John Furrier, my cohost Dave Vellante, eighth year with theCUBE, proud to have two great guests, Josh Epstein, CMO of Kaminario and Eyal David, CTO of Kaminario, great to see you guys again! >> Likewise, great to be here! >> You guys had a great event in Boston recently, what's going on with you guys? Give me an update on the company. >> Sure, I'll go first. Kaminario's been around for awhile, but we've been, first of all, moved the headquarters over to east coast US, outside of Boston, Massachusetts, opened up a great new office space there. Got a lot going on from a product perspective, a lot going on from a go-to-market perspective, you see a lot happening in the all-flash space and the storage space in general, and just, really excited to take it to the next step. We see a lot of things happening here. >> It's a pretty big week this week. We saw Scott Dietzen from Pure Storage become the Chairman and Jean Carlo, ex-CISCO MNA guy from Silver Lake come in to be CEO, so Dave and I were speculating, All flash, a lot of, what's going on! A lot of people saying, woah, is it growing? Still a need for flash. What's the big hubbub about? >> So, we definitely see a change in the market, and the emergence of two different models. The way people used to buy storage, and the way next-generation application, cloud-scale application, software-to-servers, e-commerce, online businesses, need to buy storage. And their need for simplicity, performance and cost-efficiency at scale is still driving the need for flash storage, and we'll talk about this yet to come some more. >> And you guys see those as really distinct opportunities, is that right? Can you add some color to that, Josh? >> Yeah, I think that we see the flash space made up of two different markets, one is just the massive stocking function of traditional enterprise data centers, making the move en masse to flash. And there you have, obviously, the incumbent vendors with their flash solutions, you know. That's a dogfight, there's a lot of competition in there. There's this other market which we see growing more healthily, more organically, which is the growth of these cloud-scale applications. As Eyal said, flash provider, or, software-to-server providers, e-commerce providers, fintech, healthtech, these large, highly-scalable, database-driven cloud-scale applications. That means a different type of of scale, so that's where we see less competition from the incumbents and more opportunity -- >> What's different about that market, what's the requirement, what are they looking for that makes this a good engine for them? >> So one of the key requirements is agility and flexibility. One of the current characteristics is they don't really know what is going to be the next workload, how their workload is going to change in scale over time. So they need an infrastructure that can change and adapt to their needs, still deliver the same level of performance, still deliver the same level of simplicity. But have that flexibility to address their changing needs in capacity and performance, to address growth in customers, changing in workload application, without too much pre-planning. >> So I'd ask the question to you guys, I get this all the time. So since you guys are the gurus in the area. I get this question a lot, what is a modern data center? With all the action on private cloud happenings, true private cloud, they truly point out, people are re-tooling their data centers to operate like cloud, it's still on-premise. That's kind of the gateway to hypercloud, very clear. Public cloud, workloads, all bursting, that stuff's great. What's a modern architecture, what's a modern data center? When I hear that term, what do you guys mean? >> That's a great question. So the modern data center, or even the next generation data center is exactly that, one that allows enterprises to achieve the same levels of scalability, efficiency, as the hypercloud, but on-premise, or in a hybrid fashion. But it allows them to have that level of control against operation simplicity that's hard to come by, but on their own terms, adapting to their own needs. >> So without the need to build out a massive engineering team to build this from the ground up. >> So are the buyers different, are those two worlds coming together? I wonder if you could address that. >> Yeah, I think the buyers are, in fact, different. I think, now, you see a convergence over time as the classic enterprise data centers start to look more like a private cloud. But we see this growth in large-managed private cloud providers really exciting, and they come in different forms. You have the Telcos getting into the business, you have the outsourcers getting into the business, you have the traditional channel getting into the business. We have a great partnership with Vion, a big federal reseller, and using Kaminario as a flash service offering. And they start looking like a cloud provider, and they're thinking like a cloud provider. >> And what's the benefits then? Cause I was just looking at the gov cloud impact, I was just at the Amazon Public Sector Summit. Huge traction right now because it's so fast, you can get into the government cloud quickly. Why is that unique, why, as a service, and why are you guys really driving that? >> One, it fits with our architecture perfectly. But I think from a customer standpoint, the ability to procure, like, procuring from the cloud, but also to get the kind of services, you know, as people start re-engineering applications thinking about dev-ops, cloud-data-type applications, leveraging the same kind of utilities that they might get from an Amazon or an Ajer, from a managed private cloud provider, it becomes really important. >> And Al-fed ramp is there, you get all the federal information stuff going on around it. >> So I wonder how you deal with this problem, it's a relatively small company, you're up against the big guys, you say, it's like a rock fight. But you have an affinity to, let's say, SAS players. They like your product and it fits better with their vision. But then you have this big whale, saying, okay, I'm going to buy my HR software from, you know, some SAS provider, I'm going to do some, whatever, 70,000-person deployment, but, as a quid pro quo, you've got to buy my all-flash array. So you must see that all the time. When you peel back the covers, underneath that SAS provider, what do you really see? Like, they fence off, sort of, legacy-vendors' stuff, and they really drive in their core business with your modern platform? Or is it sort of just a mishmash? >> No, I think we're seeing a shift. I think what we're seeing is, some of the legacy architectures are running up against boundaries. Boundaries in terms of complexity, boundaries in terms of agility. Kaminario was built to scale from the get-go. It was built for performance and it was built for scale. And I think what we're seeing is, the main value of these SAS providers, as they're reaching scale, is the ability to deliver consistent performance, consistent cost-efficiency, and really, our predictability. The ability to sort of forecast in the future what cost structure's going to look like in order to continue to deliver high-performance to their own users. >> So the hypothetical example I gave, I'm sure you see it, but are you, you know, winning head-to-head in those environments, and your piece is growing, and that's sort of just a static one-time deal? >> That's exactly what we're seeing, so our main growth, our main focus is on these software-to-service companies or software-to-service departments within existing companies building these types of offerings to deliver this as a service consumption model. And you were asking about the back-end, in the back-end, these are often large-scale databases operating mixed types of workloads, for example, transaction processing, analytics, all at the same time. And the need to support these types of workloads requires an infrastructure that can deliver at-scale, consistent performance. And when we face off the legacy vendors in those environments, we win out. >> You have to be substantially better as a small company. You are, otherwise, you're out of business. >> Absolutely. >> And so, interesting thing about the flash market it, a lot of the big guys realized right away, wow, I'm way behind, so they went out and they bought a lot of startups. What happened, did they sort of pollute them, through the integration, or ... (laughing) >> I think the marketshare statistics are a little bit confusing, but what we see is, you know, the bulk of the legacy vendors, you know, push in what we call retro-fit flash, basically taking their old legacy architectures, their scale-up or scale-out architectures, and cramming flash into it, and basically, then, they don't bring the same kind of simplicity, same kind of agility, same kind of scalability as a built-for-flash-offering like Kaminario. >> Right, what about, you guys have some announcements this week? >> Yup, take that? >> Yeah, two weeks ago we announced our next-generation platform, K2.n, which is based on a fully-converged, NVIO mean over fabric back end. This is basically taking our core operating system, Vision OS, which is a mature and robust storage software stack with all the data services and enterprise features that enterprises need. And deliver it on an NVIO fabric backend which leverages the existing capability to aggregate capacity and compute, and take it to the next level, delivering a very scalable and agile storage cluster that allows you to mix and match different types of resources, to add and remove resources very dynamically, and make your data center responsive in minutes and not hours or days or even months. >> You guys are familiar with our service and research, and we're very excited about NVIO over fabric, because we've been talking about it since probably, maybe 2008, 2009, some type of ability to scale and to communicate, and that's here today, finally. How close are we to actually having a product in the field that I can actually deploy? >> We will actually be shipping this in Q1, the K2.N They added another layer on top of that, We also announced a new software platform called Kaminario Flex, which is a orchestration platform which rides on top of K2.N, and allows you to dynamically compose virtual arrays out of these NVME-connected resources. So I really take that, looking ahead, that the classic notion of a monolithic shared-storage array, is going to die over time. >> Well, here's the numbers. I mean, it's automatic, go ahead. >> Well no, this is the whole debate that we've been clearing up with the true, private cloud report. I mean, guys, no-brainer, check, as a service, as the future, so you're good there. (laughs) The true pilot board, too bad it shows the on-prem stuff is declining in general, that's settlement for buying boxes, and the old way of doing things. Labor's being automated away and shifted, that's pretty obvious. Enter your business model, right? I mean, this is perfect for any cloud deal. >> Right. >> The question is, track record, bulletproof, reliability, security, the table stays all shift, data protection, all these details, that's what they care. You guys check that box ... (laughing) >> So the disability takes vision away, so I'm going to take it to the next generation. Technology is what actually allows us to do that. Whether it's in a hypercloud or we're going into a managed cloud provider, that is becoming a very desired consumption model for a lot of the ads of service members, allows them to build such a flexible architecture, based on a mature software step. >> So you guys, really, from what I see is your strategy is, get this out there quickly from a tech standpoint, software, flex, and integration with cloud is critical. Because you can offload a lot of that heavy lifting on those unique requirements to the cloud guys, where the pre-existing tech exists. Did I get that right? >> Yeah and I think what we see is these managed cloud providers are going to want to have a say in it, they want to actually be part of the evolution of the platform, right? >> Yeah, go ahead, fine, it's your stop! You can always buy the servers more flash! (laughing) >> So talk about your channel, and you go to market, help us understand that a little bit better. >> Yeah, I think it's all about focus for Kaminario. I mean, let's face it, the flash space is competitive, right, if we're going to go head-to-head with everyone, kind of, pull one of these growth-at-all-cost models. And you see what the market values those types of companies. So we've been really focused in two ways. One, SAS providers, next-generation business. I mean, if we opportunistically find a VDI deal, okay, that's great, we have a great solution for VDI, but it's not something that we're going to go out and hunting day to day. The second is really to focus on channel partners. We've got a channel first model, really, effectively 100% of our new business in 2017 will come through a channel partner. Most of those channel partners are looking at developing some type of managed services offering as well, so you know, it's not just about the margin on the deal, it's about the longterm -- >> Cause they're trying to respond to the market transit and value. >> Exactly, so it's about focus on a relatively small number of channel partners that get it, that like our model, and again, it's just -- >> Hey, you'll make money from it, cause that's all, at the end of the day, you've got to get that leverage, because that's your David and Goliath story. >> Exactly, yeah. >> And, global footprint? Is it primarily US and Europe or -- >> Yeah, so it's been, we started in Israel, US has been a good focus, last year we opened up the UK and France, end of the great we opened up Korea, we're now in Singapore, we're moving into China through partners, and so yeah, this is a global story. Clearly, US is the, in terms of adoption of these server infrastructures, US is really the furthest ahead, but it's a global phenomenon. >> What do you make of the VMwear momentum? Because two years ago, VMwear was, the stock was sort of in the tank and there was no growth, and now it's on fire, the data center's on fire, you can't get data center space! (laughing) >> From my perspective, the fast adoption that VMwear had for new technologies, for adopting containers, for adopting cloud paradigms, for adopting this new delivery model, and enabling a fuller stack aligns very well with the kind of demands of the next-generation data system we talked about, where the management plane, the orchestration plane, is becoming more and more important in optimizing the way in this infrastructure gets delivered. So that's, I believe, what is driving that forward. >> Josh and Elay, thanks so much for coming out, coming our way, you guys, company watch, love the business model. The tech comes home, you get it with that integration, man there's not a leverage there, congratulations on your success! (laughing) Great business. TheCUBE bringing you the CUBE as a service, all flash content here! Back with more VMworld coverage after this short break. (futuristic music)

>> Hi, I'm Peter Burris. Welcome to Wikibon's Action Item. On Action Item, every week I assemble the core of the Wikibon research time here in our theCUBE Palo Alto studios, as well as remotely, to discuss a seminal topic that's facing the technology industry, and business overall, as we navigate this complex transition of digital business. Here in the studio with me this week, I have David Floyer. David, welcome. >> Thank you. >> And then remotely, we have George Gilbert, Neil Raden, Jim Kobielus, and Ralph Finos. Guys, thank you very much for joining today. >> Hi, how are you doing? >> Great to be here. >> This week, we're going to discuss something that's a challenge to talk about in a small format, but we're going to do our best, and that is, given that the industry is maneuvering through this significant transformation from a product orientation to a services orientation, what's that going to mean for business models? Now this is not a small question, because there are some very, very big players that the technology industry has been extremely dependent upon to drive forward invention, and innovation, and new ideas, and customers, that are entirely dependent upon this ongoing stream of product revenue. On the other hand, we've got companies like AWS, and others that are much more dependent upon the notion of services revenue, where the delivery of the value is in a continuous service orientation. And we conclude most of the SaaS players in that as well, like sales force, etc. So how are those crucial companies, that have been so central to the development of the technology industry, and still are essential to the future of the technology industry, going to navigate this transition? Similarly, how are the services companies, for those circumstances in which the customer does want a private asset that they can utilize as a basis for performing their core business, how are they going to introduce a product orientation? What's that mix, what's that match going to be? And that's what we're going to talk about today. So David, I've kind of laid it out, but really, where are we in this notion of product to service in some of these business model changes? >> It's an early stage, but it's very, very profound changes going on. We can see it from the amount of business of the cloud business supplies are providing. You can see that Amazon, Google, IBM, and Microsoft Azure, all of those are putting very large resources into creating services to be provided to the business itself. But equally, we are aware that services themselves need to be on premise as well, so we're seeing the movement of true private cloud, for example, which is going to be provided as a service as well, so if we take some examples, like for example, Oracle, the customer, they're a cloud customer, they're providing exactly the same service on premise as they provide in the cloud. >> And by service, you mean in how the customer utilizes the technologies. >> Correct. >> The asset arrangement may be very different, but the proposition of what the customer gets out of the assets are essentially the same. >> Yes, the previous model was, we provide you with a product, you buy a number of those products, you put them together, you service it, you look after it. The new model, here coming in with TPC, with the single throat to choke, is that the vendor will look after the maintenance of everything, putting in new releases, bringing things up to date, and they will have a smaller set of things that they will support, and as a result, it's win-win. It's win for the customer, because he's costs are lower, and he can concentrate on differentiated services. >> And secure and privatize his assets. >> Right, and the vendor wins because they have economies of scale, they can provide it at a much lower cost as well. And even more important to both sides is that the time to value of new releases is much, much quicker, and time to security exposures, time to a whole number of other things, improve with this new model. >> So Jim, when we think about this notion of a services orientation, ultimately, it starts to change the relationships between the customer and the vendor. And the consequence of that is, not surprisingly, that a number of different considerations, whether they be metrics, or other elements, become more important. Specifically we start thinking about the experience that the customer has of using something. Walk us through this kind of transition to an experience-oriented approach to conceiving of whether or not the business model's being successful. >> Right, your customer will now perceive the experience in the context of an entire engagement that is multi-channel, multi-touch point, multi-device, multi-application, and so forth, where they're expecting the same experience, the same value, the same repeatable package of goodies, whatever it is they get from you, regardless of the channel through which you're touching them or they're touching you. That channel may be provided through a private, on-premises implementation of your stack, or through a public cloud implementation of your capability, or most likely through all of the above, combined into a hybrid true private cloud. Regardless of the packaging, and the delivery of that value in the context of the engagement the customer expects it to be, self-service increasingly, predictable, managed by the solution provider, guaranteed with a fast continuous release in update cycle. So, fundamentally it's an experience economy, because the customer has many other options to go to, of providers that can provide them with a good or better experience, in terms of the life cycle of things that you're doing for them. So bottom line, the whole notion of a TPC really gets to that notion that the experience is the most important thing, the cloud experience, that can be delivered on-prem, or can be delivered in the public environment. And that's really the new world. With a multi-cloud is that master sort of a matrix of the seamless cross-channel experience. >> We like to think of the notion of a business model as worrying about three fundamental questions. How are you going to create value? How are you going to deliver value? And how are you going to capture value? Where the creation is how shared it's going to be, it's going to be a network of providers, you're going to have to work with OEMs. The delivery, is it going to be online, is it going to be on-prem? Those types of questions, but this notion of value capture is a key feature, David, of how this is changing. And George, I want to ask you a question. The historical norm is that value capture took place in the form of, I give you a product, you give me cash. But when we start moving to a services-orientation, where the services is perhaps being operated and delivered by the supplier, it introduces softer types of exchange mechanisms, like, how are you going to use my data? Are you going to improve the fidelity of the system by pooling me with a lot of other customers? Am I losing my differentiation? My understanding of customers, is that being appropriated and munged with others to create models? Take us through this soft value capture challenge that a service provider has, and what specifically, I guess actually the real challenge that the customer has as they try to privatize their assets, George. >> So, it's a big question that you're asking, and let me use an example to help sort of make concrete the elaboration, or an explanation. So now we're not just selling software, but we might be selling sort of analytic data services. Let's say, a vendor like IBM works with Airbus to build data services where the aircraft that Airbus sells to its airline customers, that provides feedback data that both IBM has access to, to improve its models about how the aircraft work, as well as that data would also go back to Airbus. Now, Airbus then can use that data service to help its customers with prescriptions about how to operate better on certain routes, how to do maintenance better, not just predictive maintenance, but how to do it more just in time with less huge manuals. The key here is that since it's a data service that's being embedded with the product, multiple vendors can benefit from that data service. And the customer of the traditional software company, so in this case, Airbus being the customer of IBM, has to negotiate to make sure its IP is protected to some extent, but at the same time, they want IBM to continue working with that data feedback because it makes their models richer, the models that Airbus gets access to richer over time. >> But presumably that has to be factored into the contractual obligations of both parties enter into, to make sure that those soft dollars are properly commensurated in the agreements. That's not something that we're seeing a lot in the industry, but the model of how we work closely with our clients and our customers is an important one. And it's likely to change the way that IT thinks about itself as a provider of services. Neil, what kinds of behaviors are IT likely to start exhibiting as it finds itself, if not competing, at least trying to mimic the classes of behaviors that we're seeing from service providers inside their own businesses? >> Yeah, well, IT organizations grew over the last, I dunno, 50 years or so, organically, and it was actually amazing how similar their habits and processes, and ways of doing things were the same across industries, and locations, and so forth. But the problem was that everything they had to deal with, whether they were the computers, or the storage, or the networks, and so forth, were all really expensive. So they were always in a process of managing from scarcity. The business wanted more and more from them, and they had lower and lower budgets, because they had to maintain what they had, so it created a lot of tension between IT and organizations, and because of that, whenever a conversation happened between other groups within the business and IT, IT always seemed to have the last word, no, or okay. Whatever the decision was, it was really IT's. And what I see happening here is, when the IT business becomes less insular, I think a lot of this tension between IT and the rest of the organization will start to dissipate. And that's what I'm hoping will happen, because they started this concept of IT vs the business, but if you went out in an organization and asked 100 people what they did, not one of them would say, "I'm the business," right? They have a function, but IT created this us vs them thing, to protect themselves, and I think that once they're able to utilize external services for hardware, for software, for whatever else they have to do, they become more like a commercial operation, like supply-side, or procurement, or something, and managing those relationships, and getting the services that they're paying for, and I think ultimately that could really help organizations, by breaking down those walls in IT. >> So it used to be that an IT decision to make an investment would have uncertain returns, but certain costs, and there are multiple reasons why those returns would be uncertain, or those benefits would be uncertain. Usually it was because some other function would see the benefits under their umbrella, you know, marketing might see increased productivity, or finance would see increased productivity as a consequence of those investments, but the costs always ended up in IT. And that's one of the reasons why we yet find ourself in this nasty cycle of constantly trying to push costs down, because the benefits always showed up somewhere else, the costs always showed up inside IT. But it does raise this question ultimately of, does this notion of an ongoing services orientation, is it just another way of saying, we're letting a lock in back in the door in a big way? Because we're now moving from a relationship, a sourcing relationship that's procurement oriented, buy it, spend as little money as possible, get value out of it, as opposed to a services orientation, which is effectively, move responsibility for this part of the function off into some other service provider, perpetually. And that's going to have a significant implication, ultimately, on the question of whether or not we buy services, default to services. Ralph, what do you think, where are businesses going to end up on this, are we just going to see everything end up being a set of services, or is there going to be some model that we might use, and I'll ask the team this, some model that we might use to conceive when it should be a purchase, and when it should be a service? What do you think, Ralph? >> Yeah, I think the industry's gravitating towards a service model, and I think it's a function of differentiation. You know, if you're an enterprise, and you're running a hundred different workloads, and 15 of them are things that really don't differentiate you from your competition, or create value that's differentiable in some kind of way, it doesn't make any sense to own that kind of functionality. And I think, in the long run, more and more aspects, or a higher percentage of workload is going to be in that category. There will always be differentiation workloads, there will always be workloads requiring unique kinds of security, especially around transactions. But in the net, the slow march of service makes a lot of sense to me. >> What do you think, guys? Are we going to see, uh, do we agree with Ralph, number one? And number two, what about those exceptions? Is there a framework that we can start to utilize to start helping folks imagine what are the exceptions to that rule, what do you think David? >> Sure, I think that there are circumstances when... >> Well first, do we generally agree with the march? >> Absolutely, absolutely. >> I agree too. >> Yes, fully agree that more and more services are going to be purchased, and a smaller percentage of the IT budget from an enterprise will go into specific purchases of assets. But there are some circumstances where you will want to make sure that you have those assets on premise, that there is no other call on those assets, either from the court, or from difference of priority between what you need and what a service provider needs. So in both those circumstances, they may well choose to purchase it, or to have the asset on the premise so that it's clearly theirs, and clearly their priority of when to use it, and how to use it. So yes, clearly, an example might be, for example, if you are a bank, and you need to guarantee that all of that information is yours, because you need to know what assets are owned by who, and if you give it to a service provider, there are circumstances where there could be a legal claim on that service provider, which would mean that you'll essentially go out of business. So there are very clear examples of where that could happen, but in general, I agree. There's one other thing I'd like to add to this conversation. The interesting thing from an IT point of view, an enterprise IT, is that you'll have fewer people to do business with, you'll be buying a package of services. So that means many of the traditional people that you did business with, both software and hardware, will not be your customers anymore, and they will have to change their business models to deal with this. So for example, Permabit has become an OEM supplier of capabilities of data management inside. And Kaminario has just announced that it's becoming a software vendor. >> Nutanix. >> Nutanix is becoming a software vendor, and is either allowing other people to take the single throat to choke, or putting together particular packages where it will be the single throat to choke. >> Even NetAct, which is a pretty consequential business, has been been around for a long time, is moving in this direction. >> Yes, a small movement in that direction, but I think a key question for many of these vendors are, do I become an OEM supplier to the... >> Customer owner. >> The customer owner. Or what's my business model going to be? Should I become the OEM supplier, or should I try and market something directly in some sort of way to the vendors? >> Now this is a very important point, David, because one of the reasons, for a long time, why the OEM model ran into some challenges, is precisely over customer ownership. But when data from operations of the product, or of the service is capable of flowing, not only to the customer engagement originator, but also to the OEM supplier, the supplier has pretty significant, the OEM company has pretty significant visibility, ultimately, into what is going on with their product. And they can use that to continuously improve their product, while at the same time, reducing some of the costs associated with engagement. So the flowing of data, the whole notion of digital business allows a single data about operation to go to multiple parties, and as a consequence, all those parties now have viable business models, if they do it right. >> Yeah, absolutely. And Kaminario will be be a case in point. They need metadata about the whole system, as a whole, to help them know how to apply the best patches to their piece of software, and the same is true for other suppliers of software, the Permabit, or whoever those are, and it's the responsibility of that owner or the customer to make sure that all of those people can work in that OEM environment effectively, and improve their product as well. >> Yeah, so great conversation guys. This is a very, very rich and fertile domain, and I think it's one that we're going to come back to, if not directly, at least in talking about how different vendors are doing things, or how customers have to, or IT organizations have to adjust their behaviors to move from a procurement to a strategic sourcing set of relationships, etc. But what I'd like to do now, as we try to do every week, is getting to the Action Item round, and I'm going to ask each of you guys to give me, give our audience, give our users, the action item, what do they do differently on next Monday as a consequence of this conversation? And George Gilbert, I'm going to start with you. George, action item. >> Okay, so mine is really an extension of what we were talking about when I was raising my example, which is your OEM supplier, let's say IBM, or a company we just talked to recently, C3 IoT, is building essentially what are application data services that would accompany your products that you, who used to be a customer, are selling a supply chain master, say. So really trying to boil that down is, there is a model of your product or service could be the digital twin, and as your vendor keeps improving it, and you offer it to your customers, you need to make sure that as the vendor improves it, that there is a version that is backward compatible with what you are using. So there's the IP protection part, but then there's also the compatibility protection part. >> Alright, so George, your action item would be, don't focus narrowly on the dollars being spent, factor those soft dollars as well, both from a value perspective, as well an ongoing operational compatibility perspective. Alright, Jim Kobielus, action item. >> Action item's for IT professionals to take a quick inventory of what of your assets in computing you should be outsourcing to the cloud as services, it's almost everything. And also, to inventory, what of your assets must remain in the form of hard discreet tangible goods or products, and my contention is that, I would argue that the edge, the OT, the operational technology, the IOT, sensors and actuators that are embedded in your machine tools and everything else, that you're running the business on, are the last bastion of products in this new marketplace, where everything else becomes a service. Because the actual physical devices upon which you've built your OT are essentially going to remain hard tangible products forevermore, of necessity, and you'll probably want to own those, because those are the very physical fabric of your operation. >> So Jim, your action item is, start factoring the edge into your consideration of the arrangements of your assets, as you think about product vs services. >> Yes. >> Neil Raden, action item. >> Well, I want to draw a distinction between actually, sorry, between actually, ah damn, sorry. (laughs) >> Jim: I like your fan, Neil. >> Peter: Action item, get your monitor right. >> You know. I want to draw the distinction between actually moving to a service, as opposed to just doing something that's a funding operate. Suppose we have 500 Oracle applications in our company running on 35 or 40 Oracle instances, and we have this whole army of Oracle DBAs, and programmers, and instance tuners, and we say well, we're going to give all the servers to the Salvation Army, and we're going to move everything to the Oracle cloud. We haven't really changed anything in the way the IT organization works. So if we're really looking for change in culture and operation, and everything else, we have to make sure we're thinking about how we're changing, reading the way things get done and managed in the organization. And I think just moving to the cloud is very often just a budgetary thing. >> So your action item would be, as you go through this process, you're going to re-institutionalize the way you work, get ready to do it. Ralph Finos, action item. >> Yeah, I think if you're a vendor, if you're an IT industry vendor, you kind of want to begin to look a lot like, say, a Honda or Toyota in terms of selling the hardware to get the service in the long term relationship in the lock-in. I think that's really where the hardware vendors, as one group of providers, is going to want to go. And I think you want, as a user and an enterprise, I think you're going to want to drive your vendors in that direction. >> So your action item would be, for a user anyway, move from a procurement orientation that's focused on cost, to a vendor management orientation that's focused on co-development, co-evolution of the value that's being delivered by the service. David Floyer, action item. >> So my action item is for vendors, a whole number of smaller vendors. They have to decide whether they're going to invest in the single most expensive thing that they can do, which is an enterprise sales force, for direct selling of their products to enterprise IT, and-or whether they're going to take an OEM type model, and provide services to a subset, for example, to focus on the cloud service providers, which Kaminario are doing, or focus on selling indirectly to all of the, the vendors who are owning the relationship with the enterprise. So that, to me, is a key decision, very important decision as the number of vendors will decline over the next five years. >> Certainly, what we have, visibility to what we have right now, so your action item is, as a small vendor, choose whose sales force you're going to use, yours or somebody else's. >> Correct. >> Alright. So great conversation guys. Let me kind of summarize this a bit. This week, we talked about the evolving business models in the industry, and the basic notion, or the reason why this has become such an important consideration, is because we're moving from an era where the types of applications that we were building were entirely being used internally, and were therefore effectively entirely private, vs increasingly trying to extend even those high-volume transaction processing applications into other types of applications that deliver things out to customers. So the consequence of the move to greater integration, greater external delivery of things within the business, has catalyzed this movement to the cloud. And as a consequence, this significant reformation, from a product to a services orientation, is gripping the industry, and that's going to have significant implications on how both buyers and users of technology, and sellers and providers of technology are going to behave. We believe that the fundamental question is going to come down to, what process are you going to use to create value, with partnerships, go it alone? How are you going to deliver that value, through an OEM sales force, through a network of providers? And how are you going to capture value out of that process, through money, through capturing of data, and more of an advertising model? These are not just questions that feature in the consumer world, they're questions that feature significantly in the B2B world as well. Our expectations, over the next few years, we expect to see a number of changes start to manifest themselves. We expect to see, for example, a greater drive towards experience of the customer as a dominant consideration. And today, it's the cloud experience that's driving many of these changes. Can we get the cloud experience, both the public cloud, and on premise, for example? Secondly, our expectations that we're going to see a lot of emphasis on how soft exchanges of value take place, and how we privatize those exchanges. Hard dollars are always going to flow back and forth, even if they take on subscription, as opposed to a purchase orientation, but what about that data that comes out of the operations? Who owns that, and who gets to lay claim to future revenue streams as a consequence of having that data? Similarly, we expect to see that we will have a new model that IT can use to start focusing its efforts on more business orientation, and therefore not treating IT as the managers of hardware assets, but rather managers of business services that have to remain private to the business. And then finally, our expectation is that this march is going to continue. There will be significant and ongoing drive to increase the role that a service's business model plays in how value is delivered, and how value is captured. Partly because of the increasing dominant role that data's playing as an asset in digital business. But we do believe that there are some concrete formulas and frameworks that can be applied to best understand how to arrange those assets, how to institutionalize and work around those assets, and that's a key feature of how we're working with our customers today. Alright, once again, team, thank you very much for this week's Action Item. From theCUBE studios in beautiful Palo Alto, I want to thank David Floyer, George Gilbert, Jim Kobielus, Neil Raden, and Ralph Finos, this has been Action Item.

>> Announcer: Live from San Francisco, it's theCUBE! Covering Pure Accelerate 2017. Brought to you by Pure Storage. >> Welcome to Pier 70 in San Francisco, everybody. I'm Dave Vellante with my cohost Stu Miniman, and this is Pure Accelerate 2017. Pure Storage in 2009 started a big wave of flash migrations, and the company's strategy was to specifically go after the large EMC Install base of older Symmetrix, mainframe class storage, and even to a certain extent VNX and Clariion, if anyone remembers those terms, the Install base. Pure's ascendancy was really a function of shifting from spinning disk to flash. Fast forward seven, eight, nine years later, and Pure is talking about big data and AI and machine learning and IoT, and is really trying to completely transform not only the storage industry but itself as a leading player. The last time an independent storage company hit a billion dollars is about 20 years ago, a company called NetApp. Pure is trying to be the next to be a billion dollar company. Stu Miniman, lot of action goin' on here, used to be back in the day, I bought EMC for block, NetApp for file. Pure is trying to change that. >> Yeah, and Dave, you know storage, we've talked about it when Dell bought EMC. What did that mean to the whole storage industry? I wrote an article when it happened and said it's the end of the storage industry as we know it. When I came in here, it was like, oh, we're going to be talking about storage. You mentioned NetApp; I was at a NetApp event last week, and they said, "Storing is boring." It's really about the data, it's about the new applications. I really liked in the keynote they were talking about new use cases, new applications, how do they fit into that multi-cloud world, really interesting to hear Scott Dietzen, who we've known since this company was in stealth, laying out where the company is. They've got over 33 hundred customers, lot of SaaS applications, they're talking a lot about the machine learning and the AI pieces that are in here, but at the end of the day, I mean Dave, this is their primary business is a storage array replaces, as you said, the traditional EMC boxes that used to be sold. So how much of this is still kind of an update on what the legacy is doing, how much are they ready for the future? I'm excited to dig in with some real customers here. Pure has a good movement, good customer base, I've always had some good smart people with good tech, the Puritans as they call them, all wearing orange here. So, a cool venue and excited to dig in. >> Well, it's one of the fastest-growing companies in the storage business and in the IT business, and the way that Pure has gotten there isn't, you know, in its early days it never really talked much about so-called software-defined, it just did it. One of the problems that Pure attacks is the problem of migration. David Floyer and Wikibon have written extensively about the cost of migration, the pain of migration. It was almost just assumed, well you know, if I'm buying storage I'm going to have to migrate, and I'm going to spend 50, a hundred, sometimes many hundreds of thousands of dollars migrating my workloads from older arrays to newer arrays. Pure Storage has this Evergreen concept, where through the use of software and software-defined technologies, it's able to upgrade new customers quote-unquote seamlessly, there's that overused word again, but it's able to deliver essentially storage as a service even though you're putting an appliance on their site. So it's a radically different model. They've announced some things today, for instance like three site data replication, which is very very complicated. Trying to simplify that, so a lot of really novel ideas. Again I come back to their ascendancy. It was really based, Stu, upon attacking the slow, expensive spinning disk using its data reduction technology to create parity between the cost of spinning disk and the cost of flash, something David Floyer predicted back in 2009 would happen by 2014 for the high-spin speed. Now with FlashBlade, which is essentially the file-based system that Pure has, they're going after that same mantra with higher-capacity spinning disks, really going after the NetApp base. >> Yeah, and Dave, you mentioned that Pure could be the most recent billion dollar storage company. The company that might actually beat them to that is Nutanix. Now of course, Nutanix sells more than just storage. They're hyper-converged infrastructure, which means the compute that they're also selling, that's being used there, so it's not quite apples to apples, but the last quoter Nutanix had, about 10 million dollars more in revenue than Pure did; they also had IPOed. In that hyperconverge trend, one of the things that I saw early on on that, Dave, was attacking that migration cost. Hyperconverge, like what Pure does, a software layer, you create a pool of architectures, I can add in nodes, I can change configurations, I can update without the traditional way that we used to do it in storage, which was buy that box, take months to get it in there, load it up, transfer it over, retest it, you know all of those things that really kept your time-to-value on storage down, and that's something that Pure and all the hyper-converged players have been attacking, that kind of legacy mindset that we had in storage for so long. >> Yeah, and of course Pure's approach to converged is in partnership with Cisco and presumably others, I'm not actually sure about that, but Cisco's the main partner there with FlashStack, that's their converge play. They kind of do a knock on hyper-converged, kind of de-positioning it as sort of low-end, sort of contained, within small remote offices, whereas they're positioning FlashStack as the scalable internet infrastructure. Pure does very well with SaaS companies, they do, they're increasingly doing better with Fortune 500, they've still got a long way to go there. About 80% of their business is U.S., so there's a lot of upside internationally. We're talking about a company that'll be a billion dollars in their fiscal 2018, which is fundamentally the year we're in now, they've got about a 2.4 billion dollar market cap, they're growing at about 30% a year. And very interestingly, they had mid-60% gross margins at one point last year, they had like 69.6% gross margin, which is unheard of, you know, we haven't really seen this since back in the heydays of NetApp and EMC. The question is, is that sustainable? And of course the big question that we have today, and we're going to talk to Scott Dietzen, nickname Dietz, lot of nicknames here at Pure Storage, about is the concept of a large independent storage company. That concept is going away, it's like extinct except for one company really, NetApp is the only billion-dollar storage company left. It's been 20-plus years, maybe even 25 years since that's occurred. What are your thoughts on that, Stu? You know, I wrote a piece maybe eight years ago, Can EMC Remain Independent, recognizing that most of EMC's value was coming from Vmware and of course EMC could not remain independent. Do you think a company like Pure can unseat the leaders of Dell, EMC, HPE, IBM, and remain an independent storage company? >> Well, one of the things I always look at is what is, where are they going to hit their plateau? They're reaching towards billion dollars and they do continue to grow. I think that Pure still has plenty of headroom, but how long does it take them, Dave, to get to three or five billion dollars? The reason I throw out that number is that's probably how much storage Amazon's doing today. You know, look at Amazon, it's a 15 billion dollar company, somewhere between 15 and 30% of Amazon's business, and nobody in the storage business talks about that because it just ties to my applications. So I want to follow the applications, follow the data. It's good to hear that Pure is getting in with a lot of SaaS providers. From Wikibon data, 2/3 of the public cloud data, I'm sorry, of the public cloud revenue, is SaaS providers, so absolutely here come these like Pure, SolidFire sold, before when they were an independent company, sold to lots of service providers as well as SaaS providers. Kaminario, a Massachusetts-based flash company, sells to I believe it's about half of their business, is selling to the SaaS providers because these are companies that look at, okay I need to own how I scale my environment, own those economics, and need to grow that. And just one more piece on that economics, Dave. Look at that kind of multi- or hybrid cloud world. I bristle a little bit when I hear Scott Dietzen kind of almost say, public cloud, it's in the corner. about 20% of the use cases fit in that environment, yeah we'll do snaps to Amazon, we'll do some other things. But you don't put the public cloud in the corner and just say, oh, 20% of the market's there. 'Cause that's today, and it is still growing 50, 75, 100% depending on which public cloud you're talking about. We think that there's still plenty of upside, and when does that become a headwind that will slow the growth of what Pure's doing? You see a lot of the other software storage companies out there say how do they become software? When we were at the Veeam show, Dave, how did, they really were, we're going to live in Azure. We're going to partner with AWS, and they don't really care. Pure very much, their growth, their revenue, and their margins today are all built that they're going to be selling gear with that, yes they have the Purity 1 software and they have some cloud plays, but very much seems to be saying that public cloud's not the direction. I'm sure Scott will probably give us a little more nuance there, but you know, that legacy change to new distributed architectures has been a tailwind for Pure, and when will cloud be something that will push against their growth? >> Well, we're going to ask Scott Dietzen about that, and you're right on, I mean public cloud clearly is growing, I mean it's growing like crazy, particularly the SaaS component of that. Now of course, that can be a tailwind for Pure because they do sell to SaaS companies. They even, Scott even had a slide up there today showing Google, Uber, Facebook, AWS. Did you infer like I did that they were implying that they were selling to those companies, or? >> No, no no, I saw because in the last quarterly report they talked about basically the number four through a thousand. >> Dave: Four to a thousand. >> Dave: Right. >> So they're not selling to the top three, that they're clear on. >> So, okay, so the top three would be Amazon, Google, and Microsoft-- >> Right. >> But then there's Facebook, and Uber, possibly they could sell to those companies, Spotify is a SaaS company, so that SaaS part of the market is growing like crazy. Now the other point is, Wikibon released a study. We've been talking about it for the last couple of weeks in theCUBE around the true private cloud market forecast. True private cloud is an on-prem infrastructure that substantially mimics the public cloud at a much lower cost. We came up with this notion of true private cloud because there was so much cloudwashing going on, which really was virtualization. Now, the true private cloud is growing actually faster than any other cloud segment, now from a smaller base, granted. But we see about a 230 billion dollar TAM over the next 10 years evolving. Now, the most important part of this, and Scott Dietzen touched upon this in the morning, as did Hat, using some nicknames again, that companies are really focused on lowering their IT labor costs, and we see 150 billion dollars, approximately, of IT labor moving out of nondifferentiated heavy lifting, into what we sometimes call vendor R&D. In the form of cloud, or on-prem products, appliances, and other software frameworks that can automate and eliminate this low-value provisioning and patching and LUN management. So, Stu, you were very much involved in that true private cloud report, that market's exploding. I mean, to me, it's all about TAM expansion for Pure. They're a billion dollar company, roughly, they're participating in a 30 or 40 billion dollar market, so they have a long way to go. >> Yeah, absolutely. Because really, Dave, it's about the application. It is not a winner-takes-all environment. When you look at multicloud, it's what applications, and even we start teasing apart pieces of my applications and where they live. So, I look at, there was a nice logo slide that Pure put up, and you say okay, Hulu is a customer. Well, is Pure helping with their CDN? I really doubt it. You know, you look at Workday. Workday, up on stage at Amazon Reinvent talking about how they partnered with Amazon. So what applications is Pure winning, which ones are their customers using the public cloud for, and how does all of that sort out? Absolutely, true private cloud is really that reinvention of the data center, that flipping, if you will, of I mean Dave, you probably know better than me, that saying that IT spends 80 or 90 percent of their budget on keeping the lights on. How do we flip that so we can spend money on innovating, driving the business forward, stop spending on one of our favorite terms, undifferentiated heavy lifting and move to innovate and drive the business, and have IT serving those applications and serving the things that help me differentiate from the competition and move faster. Because, absolutely I'm sure something we'll hear this show, is it's that agility and that speed is what companies need, and Pure with their six nines of availability and that if you buy it today you're future-proof, if you will, is going to help customers say that they can have a platform that they buy today and know it's going to serve them well in the future. >> Well, Mark Benioff I think was the first that I heard said it, or it might've been Peter Burns, I can't remember, but basically there're going to be many more SaaS companies coming out of non-tech companies than tech companies. That to me, Stu, is a big, big tailwind for a company like Pure who's software first, software-defined, knows how to sell to SaaS companies. The other thing is, Pure's the latest company. They didn't say this but they certainly, one could infer it, the latest company to basically say tape is dead. So it used to be offsite backup the tape, now they're talking the flash to flash to cloud as the long-term retention. So a lot of really interesting things going on here. The venue is actually quite amazing, it's at Pier 70, this place is going to get torn down right after this show, it's a place that used to be an old steel mill that used to make battleships here, about two battleships a year during World War II. >> Yeah, the new Warriors facility is going to be here in Dogpatch soon, and I know everybody's super excited about that. >> Yeah, well, yeah, a lot of purple hats here, a lot of excited Warriors fans. >> All right, we'll be back, we've got day-to-day all day, wall-to-wall coverage of Pure Accelerate, #PureAccelerate. This is theCUBE, I'm Dave Vellante with Stu Miniman, we'll be right back with Scott Dietzen right after this short break. (upbeat electronic chords)