[Voiceover] Live from the Mandalay Bay Convention Center in Las Vegas it's The Cube. Covering VMworld 2016. Brought to you by Vmware and it's ecosystems sponsors. Now, here are your hosts, John Furrier and Stu Miniman. >> Welcome back everyone we are here live in Las Vegas for VMworld 2016 at the Mandalay Convention Center. We're in the hang space where The Cube is located. I'm John Furrier with Stu Miniman. We're here with Chad Sakac the President of EMC's Converged Platform division formerly known as VCE. Welcome back. Great to see you. Fist pump. >> It's good to see you. >> Seven years we've been doing The Cube you've been on it every single year. >> I can't believe it. >> We love having you on. >> The Cube has become a fixture of VMworld for me. Seeing you guys. Your good looking faces. It puts a smile on my face. But I can't believe it's been seven years. That's insane. >> Yeah. The seven year itch as they say in VMworld. So I got to ask you. You're always candid and colorful. But you've seen the transition. You've been in the trenches. Coding. Now you're president of a division. Big division doing great. >> It's terrifying isn't it? (laughs) >> It's interesting. The Cube is bigger. We're all getting bigger. What's your take right now? You've seen the journey. Seven years. Where are we? >> VMworld has always had a huge community. One of the things that's been defining about VMware's whole journey has been the community. And that's one thing that has stayed pretty constant. Right? There's a lot of people here. This time in Vegas. Previously in San Fran. They share a passion and a love for all things that Vmware is doing. That said. It's a very different show. It's a very different context. It's a very different ecosystem. Literally at the beginning it was one product. Right? Now if you look at the keynotes they have to struggle to get all of the awesome into an hour and a half and do it in two days. Right? And they can only hit certain highlights. Sanjay did a great job today. Kit did a great job. My favorite, Yanbing. Yanbing Li has got passion, energy and loves her baby vSAN. But imagine trying to cram all of that stuff in previously in years past. If you go back seven years that would've been all of Vmworld would it had just been on just one thing. Right? And then obviously the other thing that's going on is the entire ecosystem has changed. So we're seeing consolidation in the ecosystem. But we're also seeing, I think Pat actually did the best job I've ever seen of that realistic balance of what's happening in traditional IT, private, public hybrid cloud models. And how that's going to play out over the next few years. But there' no question that public clouds are a huge part of the landscape for here. For now. For tomorrow. Forever. >> Pat got some criticism on Twitter. Also, some blog posts out there said that the keynote was a snoozer. But it was straight talk. And that's what the ecosystem wants and we're hearing. Stu might have his own opinion on this but what I'm hearing is I want to see the path. I want to see where VMware is going to be going so I can get behind that train. Clarify. Show me the straight and narrow roadways so I can turn up the gas a little bit. >> There's the expression that basically says the customer is always right. Or the people are always right. You can trust the people. Sometimes the customer is wrong. And sometimes the people are wrong. So last year they went bananas over vMotioning of VM between two clouds. Because it plays to the base. It plays to the audience who are like I love vMotion. Why wouldn't vMotion between clouds make sense? The reality of it is that while that was cool and technically accurate. This year's demonstration of basically saying no, you're not going to motion vm between on prem and public clouds very often, if at all. But you will need to be able to do things that bridge public clouds. Is actually a much more correct and relevant answer for the market. Now the difficulty is is that sometimes you're telling people things before there ready to fully internalize it. >> Embrace it. (laughs) It's shock of the system almost. Really. So you play the base. It's a lot like politics in that way. But I got to ask you the question. >> By the way. Just like in politics if you constantly play to the base you never move forward. >> Yeah. And this has always been a diverse ecosystem. So let's start with the cloud things. Obviously ecosystem is back on the table, I'd say. It's front and center. It's always been front and center but as it consolidates we're seeing its straight path. The question that people want to know is. Will everyone have fair access to the VMware as an independent company visa the new big mega merger was announced by Michael Dell just minutes ago that September seventh will be the close date. >> What are you talking about? >> Dell Technologies. >> What? (laughter) >> You can talk about it. Dell announced it. Michael tweeted about it. >> We're not bait and switching you. We'll show you his tweets if you want. >> I'm joking. I'm joking. And by the way, I'm so pumped and so excited. Frankly, I think not everybody understands exactly what's going on inside the industry. The server storage and networking ecosystems as stand alones are actually shrinking. As workloads move to SAS. As workloads move to public cloud IOS. The parts of the ecosystem that are growing are customers that are basically saying they want converged, hyper-converged and turnkey software stacks and that's they way they want to consume. They want to simplify stuff down. To be able to pull that off you have to have all the ingredients inside the stack. Increasingly, you will not be able to be competitive without having all the those components in the stack. And this is why I am passionate that convergence hyper-convergence and convergence and also turnkey software stacks will be at the center of Dell Technologies. And I keep telling Michael and he keeps agreeing which is a good thing. Right? The reality of it is is that we cannot, in spite of that statement being true, it is also true that people will continue to want variability. That may a be a declining set but it's a bigger set of customers. And the customers are like I'm all in on turnkey. So this one is smaller but growing faster this one's a much bigger ecosystem of, I'll mix and match whatever I want and put it together. Alright? So if you look at Yanbing's section. So she said HP with vSAN. Then she went VxRail and Yanbing thanks for the shout out during the session. That was awesome. They were powering basically some great events with Di data and powerful things in small packages. That's a highly integrated system. And then they brought up a customer that was totally building it themselves. Right? So it literally in a span of two minutes you had the continuum of build it yourself, a turnkey thing and it build it yourself. So will it be sustained? Yeah. Can you expect that we are going to lean in like crazy on our integrated stack? Yeah. But will we do it in exclusion of the ecosystem? No. >> There's just different use cases. >> Yeah. VxRail is winning in the marketplace because it's a highly opinionated vSphere HCIA. If you don't have vSphere. You don't like VMware it's not the HCIA for you. Right? However, more customers say yes than they say no. And that's awesome. But we know that we're going to need to create a next generation of the Microsoft Azure stack. On prem HCIA. It won't be built by the VxRail team. But there customers want it that way. And we're not talking about it a lot this week. But last week we launched VxRack new treno which is a turnkey open stack KVM SUSE based thing. Choice baby. >> So Chad, first of all the Dell deal is announced. So this is the final nail in the coffin of VCE, correct? >> Absolutely. Of course not. The reason that we are shifting the way we talk about VCE is something really simple. If I say VCE what's the first thing that appears in your brain? >> Stu: vBlock. >> Va-blah vBlock. And that's a good thing in a sense. >> How much revenue did you do last year, Chad? >> Three point five plus billion dollars. Almost entirely in vBlock and VxBlock. >> That would be a nice a public company on it's own. >> On it's own. Right. And growing at 40% cumulative annual growth rates. That is amazing. Right? >> It's not a fail. >> And by the way the thing that's interesting is that hasn't slowed down one iota in spite of the fact that everyone knows the Dell deal is going to close. However, the difficult it is is that we are no longer just he vBlock group. We have these hyper converged appliances that are growing like sync and customers are voting with their feet and their dollars. I think in a short amount of time we'll be the number one by customer, by revenue HCIA player in the market. But furthermore, we also do these turnkey cloud stacks. So realistically VCE is more of a product brand than it is a company brand. And we're no longer a separate company. We're a part of VMC and on the seventh we'll be part of Dell EMC. >> Chad, can you help us connect the dots? We've got the converged infrastructure. The platform. You've got some SUSE team. Talk about SAS and public cloud. How does Dell, EMC, VMware stay relevant going forward and play a part in that whole story? >> So it's a great question. I'm going to try to see if I can do this in an uncharacteristically concise way. Do you believe that hybrid cloud models will win? >> Stu: Sure. >> Chad: Do you really believe it? >> I mean what we have today isn't really good hybrid cloud but that's where we need to go. >> So, by the way, we need to make the on premise clouds as simple and easy to consume in utilized modes as the public clouds are. >> Stu: Love that. >> Chad: Right. However, I think that it is inherent that economics, governance, data gravity will always balance out some workloads biasing toward public. Some biasing towards private. Furthermore, do you think that there will be one cloud model that will win? Will it all be the VMware SDDC cloud? Will it all be Azure? Will it all be Amazon? Will it all be cloud foundry? Will it all be SoftLayer? >> Well Andy Jassy has an answer for you but many people will differ with that. Including Satcha and Michael and everybody else. >> I think that there's never been in the history of all time any sustained period where there's a singularity of a stack. >> VMware has done pretty good for a while. >> Yep. But, by the way, there's never been in all of history any extended period of time when there's been a singularity of a stack. Right? So our point of view is very simple. My mission in the converged platform division today is basically to build turnkey CI and HCI to power VMware powered clouds and Cloud Foundry power clouds. Tomorrow, meaning on the seventh, immediately my strategic posture toward Microsoft pivots. EMC has always had a partnership with Microsoft but nothing like Dell's. Right? So immediately, I'm going to go. Well we must have the best on and off premises version of the Microsoft Azure stack. Dell currently leads in that market but it's very early days of that. We go from having two clouds both on and off premises. To a third one that we add. And then of course there's a fourth one which says if you want to run your most mission critical, business critical, classic apps. Virtustream is the way to go for an SAP legacy landscape. That you want to put in the cloud. That needs to have an on premise variant too. So, four clouds. Each one on and off premises. Each one available in Capex or utilitized models. If we can pull that off we can be the strongest cloud player on the market bar none. I think that's cool. >> With the choice as the key sales pitch to the client which is pick the cloud that does the best job. >> The thing that's interesting is that sometimes choice is a euphemism for blah. Like I have no strategy. I have no opinion. It's just pick whatever you want and assemble it. What I'm describing is something a little different. Which is a choice between four highly opinionated turnkey offers. >> Okay. >> Right? Now of course, we'll enable customers to build there own things but I think that over time less and less customers are going to want to do that. >> And Chad, I think that points to what we've seen in the wave of converged infrastructure and cloud is we need to get out of that heterogenous mess where I've got the poor guy buried in wires. Running around. Trouble tickets and everything else like that. It needs to be simpler. We need to have the management tools. Chad, I want to get your viewpoint on VMware. One of the criticisms I've heard is kind of the cloud management stack. We've been swinging a bunch at this and we don't yet have a solution that customers are happy with. Where do you think we are? Where do we need to go? >> So, you've been around the block on this and customers who are watching this have been around the block on this. Cloud management platforms are tough. Its actually a very, very fragmented market. With very little consolidation in the past or even looking forward. Now inside that space vRealize is actually the strongest. And it's the most deployed. It's the most widely used. But again, I don't want to make it sound like ahh we're number one. Right? Clearly there's a lot of work to be done. Last night I was talking with Sajay who heads up the vRealize suite team. And what we've seen is that the team has done a lot of work out of the 6.x, 6.5 dot and you know 6.X days into the 7.X days. And customer feedback is that it's much closer to the mark. A in terms of core product workflow, upgrade-ability. All of those sorts of things. But also in the fact that it actually has extended out to be able to automate and deploy on top of Azure and AWS. In the beginnings of the extended cloud connects vision. Now that said. In those four opinionated cloud stacks. Now this is my personal opinion, here Stu. So I always have to safe harbor all that jazz. (laughs) I think that what you see is you see those highly opinionated cloud stacks. The CMP layers, the top part of it, being able to speak to each other but always favoring their own ecosystem. Right? I think that we're going to be in that mode for a long time. >> So Chad, some people might not be aware that in addition to the VCE products in there that the solutions piece and the cloud that you have. The progress that you've made. We've talked to some of your team. I think we've got Peter coming on today. Can you talk about the EHC NHC maybe even share a bit of revenue if you can. >> Yeah. Sure. First things first, it's important to understand this at its core. The original idea of VCE, which is now eight years old, was a basic premise that says we have a pile of giblets that are all awesome. However, customers struggled to assemble them. And they want to have a turnkey offer that they can lean on us to not only deploy but sustain, support as a single offering. That was the origination story. Replace server networking compute with hypervisor, IT business operations a CMP all of those things and you have the enterprise hybrid cloud. We started getting lots of feedback from customers. We love vSphere. We love vRealize. We love vRealize automation and operations. We love all of this log-in sites stuff. We're all in with Vmware can you guys give us the easy button? Right? And so we started on version one. Then on version two, version three, 3.5 and this week we announced version 4.0. Right? We're now up to hundreds of customers so it's still in the hundreds. But it is the most curated. The most turnkey way to get the VMware SDDC deployed. Now, I still think we have a long ways to go. Because we need to make it so push button, easy. And cloud foundations that Pat announced on Monday. Is a core part of that. Think of cloud foundations turning to validated designs and the enterprise hybrid cloud being the ultimate manifestations. >> Chad, just a clarification. Hundreds of customers but from a revenue standpoint that's probably bigger than the hyper-converged market. >> So you know what's fascinating. That's actually a fact. So I hadn't really thought about it. But we're currently on a revenue run rate that we don't disclose publicly, but I'm like, how do I tiptoe around this? It is larger than the largest HCIA players by a good market margin. >> Right. >> So you're talking about hundreds of millions of dollars worth of annual revenue. And customers are saying, look I'm in. I saw the keynote. I'm aligned with VM where I want to go. Right? And enterprise hybrid cloud is designed to do that. We keep reiterating on it. On virtual geek there's a whole slew of details on the 4.0 lease. And then the other thing that we started to see is we started to see customers say, I get it. With the enterprise hybrid cloud you've made my IT operations for classic IT better. How do you help my developers build the digital enterprise? Which doesn't start with infrastructure. And it doesn't start with IAS. It starts with the way developers see the world. Which is the platform layer. And we're on version 1.1 now of the native hybrid cloud which is targeted at how do we build a platform for building cloud native apps? And that starts not with infrastructure. Not with VMware. Not with EMC. Not with servers or network. It starts with cloud foundry. >> Chad, we got to wrap. I want to get one final point in and I want to get your thoughts on it. It's more of a historical perspective but also kind of a futuristic. Take your EMC hat off and put the personal Chad hat on. The ecosystem. Where is it going to go? Obviously it's consolidating. Which means it's shifting. So the old ecosystem was great and robust as you mentioned. It's not necessarily dying. It's just shifting. It's consolidating. So that means it's shifting to something else where there will be growth. Where is it moving? Where is that puck going so people can skate to where the puck will be? >> That's a great question, John. I'm always a geek at heart. I'm always going to run that vSphere cluster in my basement. It gives me joy and gratitude on cool new intel NUC. Great stuff. But in my new job. (laughs) as the leader of a big business. The broad landscape picture is fascinating. This isn't actually rocket science. You can decode it remarkably and quickly. In industries that are declining or under pressure. Secular pressure. Consolidation is inevitable and you have to pick your partners wisely. I think people underestimate how much giants that they would think of as safe and secure bets are under pressure. Michael was wise enough to take first mover advantage. Because in those periods no one has shrunk themselves to success. Right? Conversely, you see very diversified ecosystems. When you see a very diversified ecosystem ergo cloud management platforms. Ergo security, like oh my goodness, the number of security startups and players. A hyper converged startups. I count 39 of them at the last turn. Right? They go through a life cycle of explosion of ecosystems and then inevitable consolidation phase. And people look at that consolidation phase and say oh, the fun is all over. No that means that the fun has begun because your actually starting to really move the needle at customers. Right? So you can expect to see consolidation and security space. You can expect to see by the way very disruptive point technologies occur. The container ecosystem is going to explode and then consolidate. And when you see that consolidation happening the container act Sysco acquisition is one of the earlier indications in that space but just one of them. It means that it's moving from sizzle to steak. Again, look at the open stack ecosystem. About a year ago everyone was like, all the fun is over. All of them have consolidated down into the big massive players. It's because people are now getting down- >> John: Rubber is hitting the road. >> Rubber is hitting the road. >> So where is it going now? Where is the fun going to be? >> The fun is definitely going to be very much in new data fabrics and new applications. There's no rocket science there. The space that you saw the tip of the iceberg on the cloud. Cloud connection of how you can bridge. Bridge doesn't mean migrate it means create connective tissue between on premises and off premises clouds. It's going to be really, really interesting. I think one thing that is fascinating is roles for human beings that span functions. That is the new magic mojo. When I find someone who is a developer. Who understands infrastructure they've got mojo. When you find someone who understands the span of what's going on inside the ecosystem that person's got a bright future. >> As they say in baseball, the players have to have multiple tools in their bag. Chad, we got to break but great conversation. Thanks for coming on. Really appreciate it. Good seeing you. Congratulations on all your business success and September seventh is going to be the big close date for the mega transaction. >> It's going to be awesome and by the way guys, congrats to you. Seven years of this is great. I can't wait for next year. It'll be a lot of fun. >> Thanks. Chad Sakac here inside The Cube. Where all the things are happening at VMworld inside the Hang Space at the Mandalay Bay this year for VMworld 2016. I'm John Furrier with Stu Miniman. We'll be right back. You're watching The Cube. (upbeat music)