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

>> From theCUBE Studios in Palo Alto and Boston, bringing you data-driven insights from theCUBE in ETR. This is "Breaking Analysis" with Dave Vellante. >> Cisco is a company at the crossroads. It's transitioning from a high margin hardware business to a software subscription-based model, which also should be high margin through both organic moves and targeted acquisitions. It's doing so in the context of massive macro shifts to digital in the cloud. We believe Cisco's dominant position in networking combined with a large market opportunity and a strong track record of earning customer trust, put the company in a good position to capitalize on cloud momentum. However, there are clear challenges ahead for Cisco, not the least of which is the growing complexity of its portfolio, a large legacy business, and the mandate to maintain its higher profitability profile as it transitions into a new business model. Hello and welcome to this week's Wiki-bond cube insights powered by ETR. In this breaking analysis, we welcome in Zeus Kerravala, who's the founder and principal analyst at ZK Research, long time Cisco watcher who together with me crafted the premise of today's session. Zeus, great to see you welcome to the program. >> Thanks Dave. It's always a pleasure to be with you guys. >> Okay, here's what we're going to talk about today, set the agenda. The catalyst for this session, Zeus and I attended Cisco's financial analyst day. We received a day and a half of firehose presentations, drill downs, interactions, Q and A with Cisco execs and one key customer. So we're going to share our takeaways from these sessions and add our additional thoughts. Now, in particular, we're going to talk about Cisco's TAM, its transformation to a subscription-based model, and how we see that evolving. As always, we're going to bring in some ETR spending data for context and get Zeus' take on what that tells us. And we'll end with a summary of Cisco's cloud strategy and outlook for how it could win in the cloud. So let's talk about Cisco's sort of structure and TAM opportunities. First, Zeus, Cisco has four main lines of business where it's organized it's executives around sort of four product areas. And it's got a large service component as well. Network equipment, SP routing, data center, collaboration that security, and as I say services, that's not necessarily how it's going to market, but that's kind of the way it organizes its ELT, its executive leadership team. >> Yeah, the in fact, the ELT has been organized around those products, as you said. It used to report to the street three product segments, infrastructure platforms, which was by far the biggest, it was all their networking equipment, then applications, and then security. Now it's moved to five new segments, secure agile networks, hybrid work, end to end security, internet for the future and optimized app experiences. And I think what Cisco's trying to do is align their, the way they report along the lines of the way customers buy. 'Cause I think before, you know, they had a very simplistic model before. It was just infrastructure, apps, and security. The ELT is organized around product roadmap and the product innovation, but that's not necessarily the way customers purchase things and so, purchase things so I think they've tried to change things a little bit there. When you look at those segments though, you know, by, it's interesting. They're all big, right? So, by far the biggest distilled networking, which is almost a hundred billion dollar TAM as they reported and they have it growing a about a 9% CAGR as reported by other analyst firms. And when you think about how mature networking is Dave, the fact that that's still growing at high single digit CAGR is still pretty remarkable. So I think that's one of those things that, you know, watchers of Cisco historically have been calling for the network to be commoditized for decades. For as long as I've been watching Cisco, we've been, people have been waiting for the network to be commoditized. My thesis has always been, if you can drive enough innovation into things, you can stave off commoditization and that's what they've done. But that's really the anchor for them to sell all their other products, some of which are higher margin, some which are a little bit sore, but they're all good high margin businesses to your point. >> Awesome. We're going to dig into that. So, so they flattened the organization when Geckler left. You've got Todd Nightingale, Jonathan Davidson, Liz Centoni, and Jeetu Patel who we heard from and we'll make some comments on what we heard from them. One of the big takeaways at the financial analysts meeting was on the TAM, as you just mentioned. Liz Centoni who also is heavily involved in strategy and the CFO Scott Herren, showed this slide, which speaks to the company's TAM and the organizational structure that you were just talking about. So the big message was that Cisco has got a large and growing market, you know, no shortage of available market. Somewhere between eight and 900 billion, depending on which of the slides you pull out of the deck. And ironically Zeus, when you look at the current markets number here on the right hand side of this slide, 260 billion, it just about matches the company's market cap. Maybe an interesting coincidence, but at any rate, what was your takeaway from this data? >> Well, I think, you know, the big takeaway from the data is there's still a lot of room ahead for Cisco to grow, right? Again, this is a, it's a company that I think most people would put in the camp of legacy IT vendor, just because of how long they've been around. But they have done a very good job of staving off innovation. And part of that is just these markets that they play in continue to grow and they continue to have challenges that they can solve. I think one of the things Cisco has done though, since the arrival of Chuck Robbins, is they don't fight these trends anymore, Dave. I know prior to Chuck's arrival, they really fought the tide of software defined networking and you know, trends like that, and even cloud to some extent. And I remember one of the first meetings I had with Chuck, I asked him about that and he said that Cisco will never do that again. That under his watch, if customers are going through a market transition, Cisco wants to lead them through it, not try and hold them back. And I think for that reason, they're able to look at, all of those trends and try and take a leadership position in them, even though you might look at some of those and feel that some of them might be detrimental to Cisco's business in the short term. So something like software defined WANs, which you would throw into secure agile networks, certainly doesn't, may not carry the same kind of RPOs and margins with it that their traditional routers did, but ultimately customers are going to buy it and Cisco would like to be the ones to sell it to them. >> You know, you bring up a great point. This industry is littered, there's a graveyard of executives who fought the trend. Many people, some people remember Ken Olson of Digital Equipment Corporation. "Unix is snake oil," is what he said. IBM mainframe guys said, "PCs are a toy." And of course the history, they were the wrong side of history. The other big takeaway was the shift to software in subscription. They really made a big point of this. Here's a chart Cisco showed a couple of times to make the point that it's one of the largest software companies in the world. You know, in the top 10. They also made the point that Chuck Robbins, when he joined in 2015, and since that time, it's nearly 4x'ed it's subscription software revenue, and roughly doubled its software sales. And it now has an RPO, remaining performance obligations, that exceeds 30 billion. And it's committing to grow its subscription business in the forward-looking statements by 15 to 17% CAGR through 25, which would imply about a doubling of these, the blue lines. Zeus, it's unclear if that forward-looking forecast is just software. I presume it includes some services, but as Herren pointed out, over time, these services will be bundled into the product revenue, same way SAS companies do it. But the point is Cisco is committed, like many of their peers, to moving to an ARR model. But please, share your thoughts on Cisco's move to software subscriptions and how you see the future of consumption-based pricing. >> Yeah, this has been a big shift for Cisco, obviously. It's one that's highly disruptive. It's one that I know gave their partners a lot of angst for a long time because when you sell things upfront, you get a big check for selling that, right? And when you sell things in a subscription model, you get a much smaller check for a number of months over the period of the contract. It also changes the way you deal with the customer. When you sell a one-time product, you basically wipe your hands. You come back in three or four years and say, "it's time to upgrade." When you sell a subscription, now, the one thing that I've tried to talk to Cisco and its partners about is customers don't renew things they don't use. And so it becomes incumbent on the partner, it becomes incumbent upon Cisco to make sure that things that the customer is subscribing to, that they do use. And so Cisco's had to create a customer success organization. They've had to help their partners create those customer success organizations. So it's really changed the model. And Cisco not only made the shift, they've done it faster than they actually had originally forecast. So during the financial analyst day, they actually touted their execution on software, noting that it hit it's 30% revenue as percent of total target well before it was supposed to, it's actually exceeded its targets. And now it's looking to increase that to, it actually raised its guidance in this area a little bit by a few percentage points, looking out over the next few years. And so it's moved to the subscription model, Dave, the thing that you brought up, which I do see as somewhat of a challenge is the shift to consumption-based pricing. So subscription is one thing in that I write you a check every month for the same amount. When I go to the consumption-based pricing, that's easy to do for cloud services, things like WebEx or Duo or, you know, CloudLock, some of the security products. That that shift should be relatively simple. If customers want to buy it that way. It's unclear as to how you do that when you're selling on-prem equipment with the software add-on to it because in that case, you have to put metering technology in to understand how much they're using. You have to have a minimum baseline to start with. They've done it in some respects. The old HCS product that they sold, the Telcos, actually was sold with a minimum commit and then they tacked on a utilization on top of that. So maybe they move into that kind of model. But I know it's something that they've, they get asked about a lot. I know they're still thinking about it, but it's something that I believe is coming and it's going to come pretty fast. >> I want to pick up on that because I think, you know, they made the point that we're one of the top 10 software companies in the world. It's very difficult for hardware companies to make the transition to software. You know, HP couldn't do it. >> Well, no one's done it. >> Well, IBM has kind of done it, but they really struggle. It's kind of this mishmash of tooling and software products that aren't really well-integrated. But, I would say this, everybody now, Cisco, Dell, HPE with GreenLake, Lenovo, pretty much all the traditional hardware players are trying to move to an as a service model or at least for a portion of their business. HPE's all in, Dell transitioning. And for the most part, I would make the following observation. And I'd love to get your thoughts on this. They're pretty much following a SAS like model, which in my view is outdated and kind of flawed from a customer standpoint. All these guys say, "Hey, we're doing this because "this is what the customers want." I think the cloud is really a true consumption based model. And if you look at modern SAS companies, a lot of the startups, they're moving to a consumption based model. You see that with Snowflake, you see that with Stripe. Now they will offer incentives. But most of the traditional enterprise players, they're saying, "Okay, pay us upfront, "commit to some base level. "If you go over it, you know, "we'll charge you for it. "If you go under it, you're still going to pay "for that base level." So it's not true consumption base. It's not really necessarily the customer's best interest. So that's, I think there's some learnings there that are going to have to play out. >> Yeah, the reason customers are shying away from that SAS type model, I think during the pandemic, the one thing we learned, Dave, is that the business will ebb and flow greatly from month to month sometimes. And I was talking with somebody that worked for one of the big hotel chains, and she was telling me that what their CRM providers, she wouldn't tell me who it was, except said it rhymed with Shmalesforce, that their utilization of it went from, you know, from a nice steady level to spiking really high when customers started calling in to cancel hotel rooms. And then it dropped down to almost nothing as we went through that period of stay at home. And now it's risen back up. And so for her, she wanted to move to a consumption-based model because what happens otherwise is you wind up buying for peak utilization, your software subscriptions go largely underutilized the majority of the year, and you wind up paying, you know, a lot more than you need to. If you go to more of a true consumption model, it's harder to model out from a financial perspective 'cause there's a lot of ebbs and flows in the business, but over a longer period of time, it's more cost-effective, right? And so the, again, what the pandemic taught us was we don't really know what we're going to need from a consumption standpoint, you know, nevermind a year from now, maybe even six months from now. And consumption just creates a lot more flexibility and agility. You can scale up, you can scale down. You can bring in users, you can take out users, you can add consultants, things like that. And it just, it's much more aligned with the way businesses are run today. >> Yeah, churn is a silent killer of a software company. And so there's retention is the key here. So again, I think there's lots of learning. Let's put Cisco into context with some of its peers. So this chart we developed compares five companies to Cisco. Core Dell, meaning Dell, without VMware. VMware, HPE, IBM, we've put an AWS, and then Cisco as, IBM, AWS and Cisco is the integrated plays. So the chart shows the latest quarterly revenue multiplied by four to get a run rate, a three-year growth outlook, gross margin percentage, market cap, and revenue multiple. And the key points here are that one, Cisco has got a pretty awesome business model. It's got 60% gross margin, strong operating margins, not shown here, but in the mid twenties, 25%. It's got a higher growth rate than most of its peers. And as such, a much better, multiple than say, for instance, Core Dell gets 33 cents on the revenue dollar. HPE is double that. IBM's below two X. Cisco's revenue multiple rivals VMware, which is a pure software company. Now in a large part that's because VMware stock took a hit recently, but still the point is obvious. Cisco's got a great business. Now for context, we've added AWS, which blows away any company on this chart. We've inferred a market cap of nearly 600 billion, which frankly is conservative at a 10 X revenue multiple given it's inferred margins and growth rate. Now Zeus, if AWS were a separate company, it could have a market cap that approached 800 billion in my view. But what does this data tell you? >> Well, it just tells me that Cisco continues to be a very well-run company that has staved off commoditization, despite the calling for it for years. And I think the big lesson, and I've talked to financial analysts about this over the years, is that if, I don't really believe anything in this world is a commodity, Dave. I think even when Cisco went to the server market, if you remember back then, they created a new way of handling memory management. They were getting well above average margins for service, albeit less than Cisco's network margins, but still above average for server margins. And so I think if you can continue to innovate, you will see the margin stay where they are. You will see customers continue to buy and refresh. And I think one of the challenges Cisco's had in the past, and this is where the subscription business will help, is getting customers to stay with the latest and greatest. Prior to this refresh of network equipment, some of the stuff that I've seen in the fields, 10, 15 years old, once you move to that sell me a box and then tack on the subscription revenue that you pay month by month, you do drive more consistent refresh. Think about the way you just handle your own mobile phone. If you had to go pay, you know, a thousand dollars every three years, you might not do it at that three-year cycle. If you pay 40 bucks a month, every time there's a new phone, you're going to take it, right? So I think Cisco is able to drive greater, better refresh, keep their customers current, keep the features in there. And we've seen that with a lot of the new products. The new Cat 9,000, some of the new service provider products, the new wifi products, they've all done very well. In fact, they've all outpaced their previous generation products as far as growth rate goes. And so I think that is a testament to the way they've run the business. But I do think when people bucket Cisco in with HP and Dell, and I understand why they do, their businesses were similar at one time, it's really not a true comparison anymore. I think Cisco has completely changed their business and they're not trying to commoditize markets, they're trying to drive innovation and keep the margins up, where I think HP and Dell tend to really compete on price versus innovation. >> Well, and we are going to get to this point about the tailwinds and headwinds and cloud, and how Cisco to do it. But, to your point about, you know, the cell phone analogy. To the extent that Cisco can make that seamless for customers could hide that underlying complexity, that's going to be critical for the cloud. Now, but before we get there, I want to talk about one of the reasons why Cisco such a high multiple, and has been able to preserve its margins, to your point, not being commoditized. And it's been able to grow both organically, but also has a strong history of M and A. It's this chart shows a dominant position in core networking. So this shows, so ETR data within the Fortune 500. It plots companies in the ETR taxonomy in two dimensions, net score on the vertical axis, which is a measure of spending velocity, and market share on the horizontal axis, which is a measure of presence in the survey. It's not like IDC market share, it's mentioned market share if you will. The point is Cisco is far and away the most pervasive player in the market, it's generally held its dominant position. Although, it's been under pressure in the last few years in core networking, but it retains or maintains a very respectable net score and consistently performs well for such a large company. Zeus, anything you'd add with respect to Cisco's core networking business? >> Yeah, it's maintained a dominant network position historically. I think part of because it drives good products, but also because the competitive landscape, historically has been pretty weak, right? We saw companies like 3Com and Nortel who aren't around anymore. It'll be interesting to see moving forward now that companies like VMware are involved in networking. AWS is interested in networking. Arista is a much stronger company. You know, Juniper bought Mist and is in better position. Even Extreme Networks who most people thought was dead a few years ago has made a number of acquisitions and is now a billion dollar company. So while Cisco has done a great job of execution, they've done a great job on the innovation side, their competitive landscape, looking out over the next five years, I think is going to be more difficult than it has been over the previous five years. And largely, Dave, I think that's good for Cisco. I think whenever Cisco's pressed a little bit from competition, they tend to step on the innovation gas a little bit more. And I look back and even just the transition when VMware bought Nicira, that got Cisco's SDN business into gear, like nothing else could have, right? So competition for that company, they always seem to respond well to it. >> So, let's break down Cisco's net score a little bit. Explain why the company has been able to hold its spending momentum despite its large size. This will give you a little insight to the survey. So this chart shows the granular components of net score. The lime green is new adoptions to Cisco. The forest green is spending more than 6%. The gray is flat plus or minus 5%. The pink is spending drops by more than 5%. And the red is we're chucking the platform, we're getting off. And Cisco's overall net score here is 25%, which for a company of its size speaks to the relationships that it has with customers. It's of course got a fat middle in the gray area, like all sort of large established companies. But very low defections as well, it's got low new adoptions. But very respectable. So that is background, Zeus. Let's look at spending momentum over time across Cisco's portfolio. So this chart shows Cisco's net score by that methodology within the ETR taxonomy for Cisco over three survey periods. And what jumps out is Meraki on the left, very strong. Virtualization business, its core networking, analytics and security, all showing upward momentum. AppD is a little bit concerning, but that could be related to Cisco's sort of pivot to full stack observability. So maybe AppD is being bundled there. Although some practitioners have cited to us some concerns in that space. And then WebEx at the end of the chart, it's showing some relative strength, but not that high. Zeus, maybe you could comment on Meraki and any other takeaways across the portfolio. >> Yeah, Meraki has proven to be an excellent acquisition for Cisco. In fact, you might, I think it's arguable to say it's its best acquisition in history going all the way back to camp Kalpana and Grand Junction, the ones that brought up catalyst switches. So, in fact, I think Meraki's revenue might be larger than security now. So, that shows you the momentum it has. I think one of the lessons it brought to Cisco was that simpler is better, sometimes. I think when they first bought Meraki, the way Meraki's deployed, it's very easy to set up. There's a lot of engineering work though that goes into making a product simple to use. And I think a lot of Cisco engineers historically looked at Meraki as, that's a little bit of a toy. It's meant for small businesses, things like that, but it's not for enterprise. But, Rocky's done a nice job of expanding the portfolio, of leveraging the cloud for analytics and showing you a lot of things that you wouldn't necessarily get from traditional networking equipment. And one of the things that I was really delighted to see was when they put Todd Nightingale in charge of all the networking business, because that showed to me that Chuck Robbins understood that the things Meraki were doing were right and they infuse a little bit of Meraki into the rest of the company. You know, that's certainly a good thing. The other areas that you showed on the chart, not really a surprise, Dave. When you think of the shift hybrid work and you think of the, some of the other transitions going on, I think you would expect to see the server business in decline, the storage business, you know, maybe in a little bit of decline, just because people aren't building out data centers. Where the other ones are related more to hybrid working, hybrid cloud, things like that. So it is what you would expect. The WebEx one was interesting too, because it did show somewhat of a dip and then a rise. And I think that's indicative of what we've seen in the collaboration space since the pandemic came about. Companies like Zoom and RingCentral really got a lot of the headlines. Again, when you, the comment I made on competition, Cisco got caught a little bit flat-footed, they've caught up in features and now they really stepped on the gas there. Chuck joked that he gave the WebEx team a bit of a blank check to go do what it had to do. And I don't think that was a joke. I think he actually did that because they've added more features into WebEx in the last year then I think they did the previous five years before that. >> Well, let's just drill into video conferencing real quick here, if we could. Here's that two dimensional view, again, showing net score against market share or pervasiveness of mentions, and you can see Microsoft Teams in the upper right. I mean, it's off the chart, literally. Zoom's well ahead of Cisco in terms of, you know, mentions presence. And that could be a spate of freemium, you know, but it's basically a three horse race in this game. And Cisco, I don't think is trying to take Zoom head on, rather it seems to be making WebEx a core part of its broader collaboration agenda. But Zeus, maybe you could comment. >> Well, it's all coming together, right? So, it's hard to decouple calling from video from meetings. All of the vendors, including Teams, are going after the hybrid work experience. And if you believe the future is hybrid and not just work from home, then Cisco does have a pretty interesting advantage because it's the only one that makes its own end points, where Teams and Zoom doesn't. And so that end to end experience it can deliver. The Microsoft Teams one's interesting because that product, frankly, when you talk to users, it doesn't have a great user score, like as far as user satisfaction goes, but the one thing Microsoft has done a very good job of is bundling it in to the Office365 licenses, making it very easy for IT to deploy. Zoom is a little bit in the middle where they've appealed to the users. They've done a better job of appealing to IT, but there is a, there is a battleground now going on where video's not just video. It includes calling, includes meetings, includes room systems now, and I think this hybrid work friend is going to change the way we think about these meeting tools. >> Now we'd be remiss if we didn't spend a moment talking about security as a key part of Cisco's business. And we have a graphic on this same kind of X, Y. And it's been, we've seen several quarters of growth. Although, the last quarter security growth was in the low single digits, but Cisco is a major player in security. And this X, Y graph shows, they've got both a large presence and a solid spending momentum. Not nearly as much momentum as Okta or Zscaler or a CrowdStrike and some of the smaller companies, but they're, these guys are on a rocket ship, but others that we featured in these episodes, but much more than respectable for Cisco. And security is critical to the strategy. It's a big part of the subscriber base. And the last thing, Zeus, I'll say about Cisco made the point in analyst day, that this market is crowded. You can see that in this chart. And their goal is to simplify this picture and make it easier for customers to secure their data and apps. But that's not easy, Zeus. What are your thoughts on Cisco's security opportunities? >> Yeah, I've been waiting for Cisco go to break up in security a little more than it has. I do think, I was talking with a CSO the other day, Dave, that said to me he's starting to understand that you don't have to have best of breed everywhere to have best in class threat protection. In fact, there's a lot of buyers now will tell you that if you try and have best of breed everywhere, it actually creates a negative when it comes to threat protection because keeping all the policies and things up to date is very, very difficult. And so the industry is moving more to a platform model, right? Now, the challenge for Cisco is how do you get that, the customer to think of the network as part of the platform? Because while the platform model, I think, is starting to gain traction, FloridaNet, Palo Alto, even McAfee, companies like that also have their own version of a security platform. And if you look at the financial performance of companies like FloridaNet and Palo Alto over the past, you know, over the past couple of years, they've been through the roof, right? And so I think an interesting and unique challenge for Cisco is can they convince the security buyer that the network is as important a part of that platform as any other component? If they can do that, I think they can break away from the pack. If not, then they'll stay mixed in with those, you know, Palo, FloridaNet, Checkpoint, and, you know, and Cisco, in that mix. But I do think that may present their single biggest needle moving opportunity just because of how big the security TAM is, and the fact that there is no de facto leader in security today. If they could gain the same kind of position in security as they have a networking, who, I mean, that would move the needle like no other market would. >> Yeah, it's really interesting that they're coming at security, obviously from a position of networking strength. You've got, to your point, you've got best of breed, Okta in identity, you got CrowdStrike in endpoint, Zscaler in cloud security. They're all growing like crazy. And you got Cisco and you know, Palo Alto, CSOs tell us they want to work with Palo Alto because they're the thought leader and they're obviously a major player here. You mentioned FloridaNet, there's a zillion others. We could talk all day about security. But let's bring it back to cloud. We've talked about a number of the piece in Cisco's portfolio, and we haven't really spent any time on full stack observability, which is a big push for Cisco with AppD, Intersight and the ThousandEyes acquisition. And that plays into this equation. But my take, Zeus, is Cisco has a number of cloud knobs that it can turn, it sells core networking equipment to hyperscalers. It can be the abstraction layer to connect on-prem to the cloud and hybrid and across clouds. And it's in a good position with Telcos too, to go after the 5G. But let's use this chart to talk about Cisco's cloud prospects. It's an ETR cut of the cloud customer spending. So we cut it by cloud customers. And they're are, I don't know, 800 or so in the survey. And then looking at various companies performance within that cut. So these are companies that compete, or in the case of HashiCorp, partner with Cisco at some level. Let me just set this up and get your take. So the insert on the chart by the way shows the raw data that positions each dot, the net score and the shared n, i.e. the number of accounts in the survey that responded. The key points, first of all, Azure and AWS, dominant players in cloud. GCP is a distant third. We've reported on that a lot. Not only are these two companies big, they have spending momentum on their platforms. They're growing, they are on that flywheel. Second point, VMware and Cisco are very prominent. They have huge customer bases. And while they're often on a collision course, there's lots of room in cloud for multiple players. When we plotted some other Cisco properties like AppD and Meraki, which as we said, is strong. And then for context, we've placed Dell, HPE, Aruba, IBM and Oracle. And also VMware cloud and AWS, which is notable on its elevation. And as I say, we've added HashiCorp because they're critical partner of Cisco and it's a multi-cloud play. Okay, Zeus, there's the setup. What does Cisco have to do to make the cloud a tailwind? Let's talk about strategy, tailwinds, headwinds, competition, and bottom line it for us. >> Yeah, well, I do think, well, I talked about security being the biggest needle mover for Cisco, I think its biggest challenge is convincing Wall Street in particular, that the cloud is a tailwind. I think if you look at the companies with the really high multiples to their stock, Dave, they're all ones where they're viewed as, they go along with the cloud ride, Right? So the, if you can associate yourself with the cloud and then people believe that the cloud is going to, more cloud equals more business, that obviously creates a better multiple because the cloud has almost infinite potential ahead of it. Now with respect to Cisco, I do think cloud has presented somewhat of a double-edged sword for Cisco. I don't believe the current consumption model for cloud is really a tailwind for Cisco, not really a headwind, but it doesn't really change Cisco's business. But I do think the very definition of cloud is changing before our eyes, Dave. And it's shifting away from centralized clouds. If you think of the way customers bought cloud before, it might have used AWS, it might've used Azure, but it really, that's not really multi-cloud, it's just multiple clouds in which I put things in these centralized resources. It's shifting more to this concept of distributed cloud in which a single application can be built using resources from your private cloud, for AWS, from Azure, from Edge locations, all the cloud providers have built their portfolios to support this concept of distributed cloud and what becomes important there, is a highly agile dynamic network. And in that case with distributed cloud, that is a tailwind for Cisco because now the network is that resource that ties all those distributed cloud components together. Now the network itself has to change. It needs to become a lot more agile and microservices and container friendly itself so I can spin up resources and, you know, in an Edge location, as fast as I can on-prem and things like that. But I do think it creates another wave of innovation and networking, and in that case, I think it does act as a tailwind for Cisco, aside from just the work it's done with the web scalers, you know, those types of companies. So, but I do think that Cisco needs to rethink its delivery model on network services somewhat to take advantage of that. >> At the analyst meeting, Cisco made the point that it does sell to the hyperscalers. It talked about the top six hyperscalers. You know, you had mentioned to me, maybe IBM and Oracle were in there. I always talk about four hyperscalers and only four, but that's fine. Here's my question. Practitioners have told me, buyers have told me, the more money and more workloads I put in the cloud, the less I spend with Cisco. Now, even though that might be Cisco gear powering those clouds, do you see that as a potential threat in that they don't own that relationship anymore and value will confer to the cloud players? >> Yeah, that's, I've heard that too. And I don't, I believe that's true when it comes to general purpose compute. You're probably not buying as many UCS servers and things like that because you are putting them in the cloud. But I do think you do need a refresh the network. I think the network becomes a very important role, plays a very important role there. The variant, the really interesting trend will be, what is your WAM look like? Do you have thousands of workers scattered all over the place, or do you just have a few centralized locations? So I think also, you know, Cisco will wind up providing connectivity within the cloud. If you think of the transition we've seen in other industries, Dave, as far as cloud goes, you think of, you know, F5, a company like that. People thought that AWS would commoditize F5's business because AWS provides their own load balancers, right? But what AWS provides is a very basic, very basic functionality and then use F5's virtual edition or a cloud edition for a lot of the advanced capabilities. And I think you'll see the same thing with the cloud that customers will start buying versions of Cisco that go in the cloud to drive a lot of those advanced capabilities that only Cisco delivers. And so I think you wind up buying more Cisco over time, although the per unit price of what you buy might be a little bit lower. If that makes sense here. >> It does, I think it makes a lot of sense and that fits into the cloud model. You know, you bring up a good point, the conversation with the customer was Rakuten. And that individual was essentially sharing with us, somebody was asking, one of the analysts was asking, "Well, what about the cloud guys? "Aren't they going to really threaten the whole Telco "industry and disrupt it?" And his point was, "Look at, this stuff is not trivial." So to your point, you know, maybe they'll provide some basic functionality. Kind of like they do in a lot of different areas. Data protection is another good example. Security is another good example. Where there's plenty of room for partners, competitors, of on-prem players to add value. And I've always said, "Look, the opportunity "is the cloud players spend 100 billion dollars a year "on CapEx." It's a gift to companies like Cisco who can build an abstraction layer that connects on-prem, cloud for hybrid, across clouds, out to the edge, and really be that layer that is that layer that takes advantage of cloud native, but also delivers that experience, I don't want to use the word seamlessly, but that experience across those clouds as the cloud expands. And that's fundamentally Cisco's cloud strategy, isn't it? >> Oh yeah. And I think people have underestimated over the years, how hard it is to build good networking products. Anybody can go get some silicon and build a product to connect two things together. The question is, can you do it at scale? Can you do it securely? And lots of companies have tried to commoditize networking, you know, White Boxes was looked at as the existential threat to Cisco. Huawei was looked at as the big threat to Cisco. And all of those have kind of come and gone because building high quality network equipment that scales is tough. And it's tougher than most people realize. And your other point on the cloud providers as well, they will provide a basic level of functionality. You know, AWS network equipment doesn't work in Azure. And Azure stuff doesn't work in Google, and Google doesn't work in AWS. And so you do need a third party to come in and act as almost the cloud middleware that can connect all those things together with a consistent set of policies. And that's what Cisco does really well. They did that, you know back when they were founded with routing protocols and you can think this is just an extension of what they're doing just up at the cloud layer. >> Excellent. Okay, Zeus, we're going to leave it there. Thanks to my guest today, Zeus Kerravala. Great analysis as always. Would love to have you back. Check out ZKresearch.com to reach him. Thank you again. >> Thank you, Dave. >> Now, remember I publish each week on Wikibond.com and siliconangle.com. All these episodes are available as podcasts, just search "Braking Analysis" podcast, and you can connect on Twitter at DVallante or email me David.Vallante@siliconangle.com. Thanks for the comments on LinkedIn. Check out etr.plus for all the survey action. This is Dave Vallante for theCUBE insights powered by ETR. Be well and we'll see you next time. (light music)

(upbeat music) >> Narrator: From the Cube Studios in Palo Alto in Boston, connecting with thought leaders all around the world. This is the Cube Conversation. >> Welcome to this Cube Conversation. I'm Lisa Martin, excited to talk to the CEO of Styra, Bill Mann today. Bill, welcome to the Cube. >> Hi Lisa, how are you doing? >> I'm doing well. I should say welcome back. You've been on the Cube at a previous company, but we're excited to talk to you today about Styra, what's going on? So let's go ahead and start informing our audience who Styra is and what you do? >> Sure, so who Styra is and what do we do? So Styra is a company that's focused on reinventing policy and authorization in the cloud native stack. We're the company that created an open source project called Open Policy Agent, it's part of CNCF. And on top of Open Policy Agent, we built a control flame, a management plane to help organizations really put OPA into production and operationalized OPA. >> An OPA is Open Policy Agent. That's what the company actually developed with CNCF, correct? >> So, we actually founded Open Policy Agent and then we contributed Open Policy Agent to CNCF. And the real goal of contributing the Open Policy Agent to CNCF was we believe that we want to get authorization defacto in the market, right? And the only way to get something out there that everybody uses is to put it into the open source and having an entity like the CNCF supporting the project. So, really it's about getting everybody, all enterprises and vendors to use Open Policy Agent as a way of solving authorization for the cloud native environment. >> So you say Styra is reinventing policy and authorization for cloud native applications, your target audience, security folks, developer folks, what changes has cloud native brought to security and development teams? >> Sure, so what changes has cloud native brought to security and development teams? So fundamentally there've been three changes in the marketplace. One, as you know we're shifting from this monolithic architecture of building applications to now this new distributed architectures of kubernetes, microservices and Deep-coupled architecture. So fundamentally the way we build applications is fundamentally changed because everybody wants to have scale up and scale down and so forth. Second, the way we actually developed software, we've moved now to a DevOps model where we're doing more things earlier on in the cycle so we can innovate faster and we're producing code on an hourly basis versus when I joined the industry which was probably three releases a year. And then thirdly which is kind of a major topic that all of us kind of understand is our focus on privacy and security is higher than it's been before. And if these applications are going to be way more complex and more distributed and we're going to innovate faster than the way we focus on security and privacy has to be done differently as well. And if we don't do it differently, then we're going to have to all the breaches that we had in the previous generation of the app stack. >> And we don't want that, but you're right privacy and security are increasing concerns in any environment. How do you help address those and also with the thought of privacy and security are going to be concerned for quite a long time? >> Yeah, so let me take a step back. So how do we address privacy and security? So, at a fundamental level, authorization is a foundational part of security and authorization has never really been solved or re-imagined ever for the last 50 years or so. Every application developer or security vendor has built authorization into their own stack and done it in a very proprietary way. And it's been locked away within these applications and these stacks and so forth. So what happens now when you've got a highly distributed environment is that you've got so many moving parts, you still need to apply authorization. So, the way we've tackled it is by building Open Policy Agent. And there's three fundamental kind of tenants around Open Policy Agent that make it really ideal for this cloud native environment. Number one, it's policy as code and everything in the market now, everything is as code. You buy infrastructure as code. So this is now policy as code. So you can describe in a declarative model, how you want the policy for a system to be developed and you can use the language called Rego to do that. Second is the fact that all the cloud native projects out there which are all developed based upon open source technologies, kubernetes, microservices, envoy, SDO, cafco, all these kinds of buzzwords you hear in the marketplace, they all integrate with Open Policy Agent already. And then thirdly the architecture of Open Policy Agent is that it's distributed, which means that it's ideally suited for this distributed architecture for cloud native. And those are the three kind of characteristics of Open Policy Agent leading to developers loving it. And when I say they love it, we've got hundreds and thousands of users of Open Policy Agent. When you go to the CNCF shows co op con earlier this year and there's two more coming this year. There's many, many talks on it. You've got cloud vendors like Google and Microsoft adopting Open Policy Agent, got a lot of enterprises adopting Open Policy Agent. So, that's really fundamentally what we've built is we've built an authorization architecture for this new world to really address the security and privacy concerns, which have always existed and I'm going to be more exponential in this new world. >> And I think you've also built a community around OPA. Can you share a little bit of information about that and how they help with the co-development and even some of the other things that you're commercializing? >> Sure, yeah. So, now what have we done in from a community point of view with Open Policy Agents? So yeah, the community is a integral part of any open source project and we're lucky to have a great community. We've got a great community of enterprise users of Open Policy Agents and vendors as well, vendors like Microsoft and Google who are now contributing to OPA and building it up. And for me, the most important part of a community is that you learn how enterprises are using your software and they share ideas and they share use cases and you're able to innovate really, really fast. And what we've learned from that is the use cases that they use Open Policy Agent for, for instance, one of the major use cases for Open Policy Agent is for kubernetes Admission Control. So, essentially we can test the configuration of an application which is described in a file called Yammer before it goes into production. So, think of it as pre-production tests, but companies are using it for microservices and applications and data and so forth. So, it helps us understand what they're using it for, but also we use it to help us develop our commercial product, which is the management control plane for OPA. So, we learn about what they're missing in the open source project that we can use to build our commercial product which is ready for enterprise use. >> So you've had a lot of success with OPA. Talk to me about Styra DAS and why the need for that? >> Sure, so why do we need Styra DAS recognizing that OPA is very, very successful. So, the fundamental difference is OPA is a very focused on developers and it's very focused on an environment for an individual node or cluster, but it doesn't have all the enterprise features necessary for a real enterprise to go into production. So what we notice is companies use OPA for pre-production, but when they want to go into production, they need a user interface. They need a way to author policies, distribute policies, monitor policies, do impact analysis and a whole bunch of other features and capabilities that are needed for enterprise deployments and so forth. So that's a fundamental difference between OPA and the commercial product. The commercial product is really operationalizing in OPA for an enterprise deployment. >> So the relationship between Styra and OPA seems very collaborative to me that what you just described with the commercial product of Styra DAS is really one that was developed based on what the OPA community and Styra have learned together? >> Correct, Yes. So, OPA was created by the CTO, the founders of the company when the team was actually part of Nicira and they left Nicira which got acquired by VMware and so on early on several years ago, the need for distributed architectures and the need for unified policy so they left and created OPA. And from day one they wanted to get over into everybody's hands. That's why they contributed it to open source as part of CNCF. And then the next kind of strategy is to focus on the control apps aspects, the enterprise aspect. So yes, the same team that created OPA is the same team that's creating the Styra DAS commercial offering as well. >> So from the enterprise perspective, talk to me about some of the companies that you're talking to. I imagine any organization that's focused on cloud native, but any industry in particular that you see is really kind of leading edge right now? >> Yeah, so which industries are we talking to in terms of using Styra DAS and OPA? What we've actually found it's across the board. And we've seen in the early days that financial services and high tech were using OPA, but now it's really across the board. So it's all verticals really. And what we've noticed is any organization which is going through a cloud transformation project where they're either building new applications based upon cloud native app stacks like kubernetes and microservices and so forth or shift to the cloud are the companies that are also adopting OPA and the Styra DAS product, right? Because it's all part of the same solution set. And what we're noticing now and this is a fundamental difference is platform architects and developers are kind of prime to use these technologies. They learn about these technologies by going to the conferences and unlike the past which was very much top down selling from the sea level down, this is very much bottomed up. So developers learn about OPA from going to the conferences. They use it within their own environment and then they tell their management that, "Look, we're using OPA already. "We're missing these capabilities," or they come to us and we educate them about the Styra DAS product and so forth. So it's a very different sales model as well and that's why it's very important for ourselves and any open source company to really keep developers happy and provide a solution, that's meeting their requirements. >> On that side with so many of us and developers included working from home for the past nearly four months. We now are doing things like this virtual conversations, virtual events, how is Styra helping to continue to feed and educate those developers so that they can understand how you can impact their job functions and how they can then elevate you guys up the stack. >> Sure, so what's changed over the last three months or so in the market as a consequence of COVID-19 and from an educational point of view. So, what we've seen is fundamentally in the early days of COVID-19 everybody was kind of get the head around how to work from home and so forth, but what we've seen across the all verticals is developers have now really focused on educating themselves and just as a data point and the audience that we get to the OPA website is as high as it's ever been for the last three months. And what we're doing as a company is a lot of training sessions, video content, write-ups, blogs and so forth, right? And really helping the community learn about OPA and how to solve these kind of fundamental problems around policy and authorization within the environment. We've also been helped by the community as well. So there's been talks about a number of companies, Microsoft, Google, Palo Alto had a talk and many many companies are talking about OPA now and I love it because ultimately being an open source company and building a project which we want to become defacto, we want to raise the bar for security across the world, right? And if we can do that then it's going to be an achievement for us and it's very gratifying knowing that we're really fixing security problems for organizations because ultimately we always want to be able to use an application or a banking service and not worry about privacy and security concerns and that's ultimately what we're all after. But this is such a fundamental component that once we want to have developers learn this now because if they can incorporate this into the DevOps app stack then in future years when these applications are built and they're exposed there'll be more secure. >> And so it sounds like maybe there's even more engagement now during COVID when everybody is at home. Tell me about some of the things that are coming down the pipe for Styra in light of all of this exciting collaboration with the community. >> Sure, yeah. There's definitely been way more collaboration as a consequence of COVID-19. People are at home and they're focusing and they're going through learning sessions and browsing the website going through the video content and so forth. So what we're engaging as much as we have ever been, in fact I would argue that we're engaging even more so now, because it's just a different environment to work in. And what we're focused on now is really adding more features to the Styra DAS product, just to step back for a second, Open Policy Agent works across the cloud native stack and Styra DAS has been focused first on the kubernetes use case and now it also supports microservices as well. And then what we're continuing to do is add more of those enterprise features into Styra DAS and move up and up across the stack. But it is all driven by developers that we're talking to on a daily basis and that's leading to where the project is moving forward and the development for the roadmap and so forth. >> And Styra DAS was only launched in 2019, is that correct? >> 2019 yes, that's correct. That's correct. Yes, time flies, right? So, yes. >> A lot of change and a lot of development in a short period of time. >> That's right and 2019 was a big year for us, right? We started last 2019 with a soft launch at the RSA conference and we finished 2019 with series a funding led by Xcel. And yeah, it's great to see how the commercial product has been gaining traction in the marketplace as well as OPA as well and I think it's a combination of events. One, the fact that cloud native is now really well understood. Second, the fact that kubernetes at the beginning of 2019, it was still, "What does kubernetes mean, "is it going into production?" Now kubernetes is absolutely going into production and there's such a desire for organizations to make sure that security and policy and compliance are resolved before applications go into production otherwise we're going to have the same kind of challenges we had with previous app stacks. >> Well, the momentum is certainly with you. I can definitely hear that in your voice bell. Thank you so much for joining me talking about Styra, how you're reinventing policy and authorization for cloud native applications. >> Thank you, Lisa. >> For my guest Bill Mann, I'm Lisa Martin. You're watching the Cube Conversation. Thanks for your time. (upbeat music)

>> From theCUBE Studios in Palo Alto and Boston, connecting with thought leaders all around the world, this is a CUBE Conversation. (smooth music) >> Hi, I'm Stu Miniman, and welcome to this special exclusive presentation from theCUBE. We're digging into Pensando and their Future Proof Your Enterprise event. To help kick things off, welcoming in a friend of the program, Scott Raynovich. He is the principal analyst at Futuriom coming to us from Montana. I believe first time we've had a guest on the program in the state of Montana, so Scott, thanks so much for joining us. >> Thanks, Stu, happy to be here. >> All right, so we're going to dig a lot into Pensando. They've got their announcement with Hewlett Packard Enterprise. Might help if we give a little bit of background, and definitely I want Scott and I to talk a little bit about where things are in the industry, especially what's happening in networking, and how some of the startups are helping to impact what's happening on the market. So for those that aren't familiar with Pensando, if you followed networking I'm sure you are familiar with the team that started them, so they are known, for those of us that watch the industry, as MPLS, which are four people, not to be confused with the protocol MPLS, but they had very successfully done multiple spin-ins for Cisco, Andiamo, Nuova and Insieme, which created Fibre Channel switches, the Cisco UCS, and the ACI product line, so multiple generations to the Nexus, and Pensando is their company. They talk about Future Proof Your Enterprise is the proof point that they have today talking about the new edge. John Chambers, the former CEO of Cisco, is the chairman of Pensando. Hewlett Packard Enterprise is not only an investor, but also a customer in OEM piece of this solution, and so very interesting piece, and Scott, I want to pull you into the discussion. The waves of technology, I think, the last 10, 15 years in networking, a lot it has been can Cisco be disrupted? So software-defined networking was let's get away from hardware and drive towards more software. Lots of things happening. So I'd love your commentary. Just some of the macro trends you're seeing, Cisco's position in the marketplace, how the startups are impacting them. >> Sure, Stu. I think it's very exciting times right now in networking, because we're just at the point where we kind of have this long battle of software-defined networking, like you said, really pushed by the startups, and there's been a lot of skepticism along the way, but you're starting to see some success, and the way I describe it is we're really on the third generation of software-defined networking. You have the first generation, which was really one company, Nicira, which VMware bought and turned into their successful NSX product, which is a virtualized networking solution, if you will, and then you had another round of startups, people like Big Switch and Cumulus Networks, all of which were acquired in the last year. Big Switch went to Arista, and Cumulus just got purchased by... Who were they purchased by, Stu? >> Purchased by Nvidia, who interestingly enough, they just picked up Mellanox, so watching Nvidia build out their stack. >> Sorry, I was having a senior moment. It happens to us analysts. (chuckling) But yeah, so Nvidia's kind of rolling up these data center and networking plays, which is interesting because Nvidia is not a traditional networking hardware vendor. It's a chip company. So what you're seeing is kind of this vision of what they call in the industry disaggregation. Having the different components sold separately, and then of course Cisco announced the plan to roll out their own chip, and so that disaggregated from the network as well. When Cisco did that, they acknowledged that this is successful, basically. They acknowledged that disaggregation is happening. It was originally driven by the large public cloud providers like Microsoft Azure and Amazon, which started the whole disaggregation trend by acquiring different components and then melding it all together with software. So it's definitely the future, and so there's a lot of startups in this area to watch. I'm watching many of them. They include ArcOS, which is a exciting new routing vendor. DriveNets, which is another virtualized routing vendor. This company Alkira, which is going to do routing fully in the cloud, multi-cloud networking. Aviatrix, which is doing multi-cloud networking. All these are basically software companies. They're not pitching hardware as part of their value add, or their integrated package, if you will. So it's a different business model, and it's going to be super interesting to watch, because I think the third generation is the one that's really going to break this all apart. >> Yeah, you brought up a lot of really interesting points there, Scott. That disaggregation, and some of the changing landscape. Of course that more than $1 billion acquisition of Nicira by VMware caused a lot of tension between VMware and Cisco. Interesting. I think back when to Cisco created the UCS platform it created a ripple effect in the networking world also. HP was a huge partner of Cisco's before UCS launched, and not long after UCS launched HP stopped selling Cisco gear. They got heavier into the networking component, and then here many years later we see who does the MPLS team partner with when they're no longer part of Cisco, and Chambers is no longer the CEO? Well, it's HPE front and center there. You're going to see John Chambers at HPE Discover, so it was a long relationship and change. And from the chip companies, Intel, of course, has built a sizeable networking business. We talked a bit about Mellanox and the acquisitions they've done. One you didn't mention but caused a huge impact in the industry, and something that Pensando's responding to is Amazon, but Annapurna Labs, and Annapurna Labs, a small Israeli company, and really driving a lot of the innovation when it comes to compute and networking at Amazon. The Graviton, Compute, and Nitro is what powers their Outposts solutions, so if you look at Amazon, they buy lots of pieces. It's that mixture of hardware and software. In early days people thought that they just bought kind of off-the-shelf white boxes and did it cheap, but really we see Amazon really hyper optimizes what they're doing. So Scott, let's talk a little bit about Pensando if we can. Amazon with the Nitro solutions built to Outposts, which is their hybrid solution, so the same stack that they put in Amazon they can now put in customers' data center. What Pensando's positioning is well, other cloud providers and enterprise, rather than having to buy something from Amazon, we're going to enable that. So what do you think about what you've seen and heard from Pensando, and what's that need in the market for these type of solutions? >> Yes, okay. So I'm glad you brought up Outposts, because I should've mentioned this next trend. We have, if you will, the disaggregated open software-based networking which is going on. It started in the public cloud, but then you have another trend taking hold, which is the so-called edge of the network, which is going to be driven by the emergence of 5G, and the technology called CBRS, and different wireless technologies that are emerging at the so-called edge of the network, and the purpose of the edge, remember, is to get closer to the customer, get larger bandwidth, and compute, and storage closer to the customer, and there's a lot of people excited about this, including the public cloud providers, Amazon's building out their Outposts, Microsoft has an Edge stack, the Azure Edge Stack that they've built. They've acquired a couple companies for $1 billion. They acquired Metaswitch, they acquired Affirmed Networks, and so all these public cloud providers are pushing their cloud out to the edge with this infrastructure, a combination of software and hardware, and that's the opportunity that Pensando is going after with this Outposts theme, and it's very interesting, Stu, because the coopetition is very tenuous. A lot of players are trying to occupy this edge. If you think about what Amazon did with public cloud, they sucked up all of this IT compute power and services applications, and everything moved from these enterprise private clouds to the public cloud, and Amazon's market cap exploded, right, because they were basically sucking up all the money for IT spending. So now if this moves to the edge, we have this arms race of people that want to be on the edge. The way to visualize it is a mini cloud. Whether this mini cloud is at the edge of Costco, so that when Stu's shopping at Costco there's AI that follows you in the store, knows everything you're going to do, and predicts you're going to buy this cereal and "We're going to give you a deal today. "Here's a coupon." This kind of big brother-ish AI tracking thing, which is happening whether you like it or not. Or autonomous vehicles that need to connect to the edge, and have self-driving, and have very low latency services very close to them, whether that's on the edge of the highway or wherever you're going in the car. You might not have time to go back to the public cloud to get the data, so it's about pushing these compute and data services closer to the customers at the edge, and having very low latency, and having lots of resources there, compute, storage, and networking. And that's the opportunity that Pensando's going after, and of course HPE is going after that, too, and HPE, as we know, is competing with its other big mega competitors, primarily Dell, the Dell/VMware combo, and the Cisco... The Cisco machine. At the same time, the service providers are interested as well. By the way, they have infrastructure. They have central offices all over the world, so they are thinking that can be an edge. Then you have the data center people, the Equinixes of the world, who also own real estate and data centers that are closer to the customers in the metro areas, so you really have this very interesting dynamic of all these big players going after this opportunity, putting in money, resources, and trying to acquire the right technology. Pensando is right in the middle of this. They're going after this opportunity using the P4 networking language, and a specialized ASIC, and a NIC that they think is going to accelerate processing and networking of the edge. >> Yeah, you've laid out a lot of really good pieces there, Scott. As you said, the first incarnation of this, it's a NIC, and boy, I think back to years ago. It's like, well, we tried to make the NIC really simple, or do we build intelligence in it? How much? The hardware versus software discussion. What I found interesting is if you look at this team, they were really good, they made a chip. It's a switch, it's an ASIC, it became compute, and if you look at the technology available now, they're building a lot of your networking just in a really small form factor. You talked about P4. It's highly programmable, so the theme of Future Proof Your Enterprise. With anything you say, "Ah, what is it?" It's a piece of hardware. Well, it's highly programmable, so today they position it for security, telemetry, observability, but if there's other services that I need to get to edge, so you laid out really well a couple of those edge use cases and if something comes up and I need that in the future, well, just like we've been talking about for years with software-defined networking, and network function virtualization, I don't want a dedicated appliance. It's going to be in software, and a form factor like Pensando does, I can put that in lots of places. They're positioning they have a cloud business, which they sell direct, and expect to have a couple of the cloud providers using this solution here in 2020, and then the enterprise business, and obviously a huge opportunity with HPE's position in the marketplace to take that to a broad customer base. So interesting opportunity, so many different pieces. Flexibility of software, as you relayed, Scott. It's a complicated coopetition out there, so I guess what would you want to see from the market, and what is success from Pensando and HPE, if they make this generally available this month, it's available on ProLiant, it's available on GreenLake. What would you want to be hearing from customers or from the market for you to say further down the road that this has been highly successful? >> Well, I want to see that it works, and I want to see that people are buying it. So it's not that complicated. I mean I'm being a little superficial there. It's hard sometimes to look in these technologies. They're very sophisticated, and sometimes it comes down to whether they perform, they deliver on the expectation, but I think there are also questions about the edge, the pace of investment. We're obviously in a recession, and we're in a very strange environment with the pandemic, which has accelerated spending in some areas, but also throttled back spending in other areas, and 5G is one of the areas that it appears to have been throttled back a little bit, this big explosion of technology at the edge. Nobody's quite sure how it's going to play out, when it's going to play out. Also who's going to buy this stuff? Personally, I think it's going to be big enterprises. It's going to start with the big box retailers, the Walmarts, the Costcos of the world. By the way, Walmart's in a big competition with Amazon, and I think one of the news items you've seen in the pandemic is all these online digital ecommerce sales have skyrocketed, obviously, because people are staying at home more. They need that intelligence at the edge. They need that infrastructure. And one of the things that I've heard is the thing that's held it back so far is the price. They don't know how much it's going to cost. We actually ran a survey recently targeting enterprises buying 5G, and that was one of the number one concerns. How much does this infrastructure cost? So I don't actually know how much Pensando costs, but they're going to have to deliver the right ROI. If it's a very expensive proprietary NIC, who pays for that, and does it deliver the ROI that they need? So we're going to have to see that in the marketplace, and by the way, Cisco's going to have the same challenge, and Dell's going to have the same challenge. They're all racing to supply this edge stack, if you will, packaged with hardware, but it's going to come down to how is it priced, what's the ROI, and are these customers going to justify the investment is the trick. >> Absolutely, Scott. Really good points there, too. Of course the HPE announcement, big move for Pensando. Doesn't mean that they can't work with the other server vendors. They absolutely are talking to all of them, and we will see if there are alternatives to Pensando that come up, or if they end up singing with them. All right, so what we have here is I've actually got quite a few interviews with the Pensando team, starting with I talked about MPLS. We have Prem, Jane, and Sony Giandoni, who are the P and the S in MPLS as part of it. Both co-founders, Prem is the CEO. We have Silvano Guy who, anybody that followed this group, you know writes the book on it. If you watched all the way this far and want to learn even more about it, I actually have a few copies of Silvano's book, so if you reach out to me, easiest way is on Twitter. Just hit me up at @Stu. I've got a few copies of the book about Pensando, which you can go through all those details about how it works, the programmability, what changes and everything like that. We've also, of course, got Hewlett Packard Enterprise, and while we don't have any customers for this segment, Scott mentioned many of the retail ones. Goldman Sachs is kind of the marquee early customer, so did talk with them. I have Randy Pond, who's the CFO, talking about they've actually seen an increase beyond what they expected at this point of being out of stealth, only a little over six months, even more, which is important considering that it's tough times for many startups coming out in the middle of a pandemic. So watch those interviews. Please hit us up with any other questions. Scott Raynovich, thank you so much for joining us to help talk about the industry, and this Pensando partnership extending with HPE. >> Thanks, Stu. Always a pleasure to join theCUBE team. >> All right, check out thecube.net for all the upcoming, as well as if you just search "Pensando" on there, you can see everything we had on there. I'm Stu Miniman, and thank you for watching theCUBE. 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>> Announcer: From theCUBE studios in Palo Alto and Boston connecting with thought leaders all around the world. This is a CUBE conversation. >> Hello everybody, welcome to this special CUBE conversation. My name is Dave Vellante and you're watching theCUBE. We're here with Sanjay Poonen who's the COO of VMware and a good friend of theCUBE. Sanjay great to see you. Thanks for coming on. >> Dave it's a pleasure. In these new circumstances, shelter at home and remote working. I hope you and your family are doing well. >> Yeah, and back at you Sanjay. Of course I saw you on Kramer Mad Money the other night. I was jealous. I said, "I need Sanjay on to get an optimism injection." You're a great leader And I think, a role model for all of us. And of course the "Go Niners" in the background really incented me to get-- I got my Red Sox cap and we have a lack of sports, but, and we miss it, But hey, we're making the best. >> Okay Red Sox is better than the Patriots. Although I love the Patriots. If i was in the east coast, especially now that Brady's gone. I guess you guys are probably ruing a little bit that Jimmy G came to us. >> I am a huge Tampa Bay fan all of a sudden. I be honest with you. Tom Brady can become a Yankee and I would root for them. I tell you that's how much I love the guy. But anyway, I'm really excited to have you on. It's obviously as you mentioned, these times are tough, but we're making the best do and it's great to see you. You are a huge optimist, but I want to ask you, I want to start with Narendra Modi just announced, basically a lockdown for 21 days. 1.3 billion people in your native country. I wonder if you could give us some, some thoughts on that. >> I'm, my parents live half their time in Bangalore and half here. They happen to be right now in the US, and they're doing well. My dad's 80 and my mom's 77. I go to India a lot. I spent about 18 years of my life there, and the last 32 odd years here and I still go there a lot. Have a lots friends and my family there. And , it's I'm glad that the situation is kind of , as best as they can serve it. It's weird, I was watching some of the social media photos of Bangalore. I tweeted this out last night. The roads look so clean and beautiful. I mean, it looks like 40 years ago when I was growing up. When I would take a bicycle to school. I mean Bangalore's one of the most beautiful cities in India, very green and you can kind of see it all again. And I think, as I've been watching some of the satellite photos of the various big cities to just watch sort of Mother Nature. Obviously, we're in a tough time and, I open my empathy and thoughts and prayers go to every family that's affected by this. And certainly ones who have lost loved ones, but it's sort of, I think it's neat, that we're starting to see some of the beautiful aspects of nature. Even as we deal with the tough aspects of sheltered home. And the incredible tough impacts of this pandemic across the world. >> Yeah, I think you're right. There is a silver lining as much as, our hearts go out to those that are that are suffering. You're seeing the canals in Venice run clear. As you mentioned, the nitrous oxide levels over China. what's going on in Bangalore. So, there is a little bit of light in the end of the tunnel for the environment, I hope. and at least there's an indication that we maybe, need to be more sensitized to this. Okay, let's get into it. I want to ask you, so last week in our breaking analysis. We worked with a data company called ETR down in New York City. They do constant surveys of CIO's. I want to read you something that they came out with just on Monday and get your reaction. Basically, their annual growth and IT spend they're saying, is showing a slight decline for 2020. As a significant number of organizations plan to cut and/or delay IT expenditures due to the coronavirus. Though the current climate may suggest worse many organizations are accelerating spending for 2020 as they ramp up their work-from-home infrastructure. These organizations are offsetting what would otherwise be a notable decline in global IT spend versus last year. Now we've gone from the 4% consensus at the beginning of the year. ETR brought it down to zero percent and then just on Monday, they went to slight negative. But, what's not been reported widely is the somewhat offsetting factor of work-from-home infrastructure. VMware obviously plays there. So I wonder if you could comment on what you're seeing. >> Yeah, Dave, I think , we'll have to see . I'm not an economic pundit. So we're going to have to see what the, IT landscape looks like in the overall sense and we'll probably play off GDP. Certain industries: travel, hospitality, I mean, it's brutal for them. I mean, and I hope that, what I really hope, that's going to happen to that industry, especially there's an infusion through recovery type of bill. Is that no real big company goes under, and goes bankrupt. I mean kind of the situation in 2008. I mean, people wondering what will happen to the Airlines. Boeing, hospital-- these are ic-- some of them like Boeing are iconic brands of the United States and of the world. There's only two real companies that make planes. So we've got to make sure that those industries stay afloat and stay good for the health of the world. Health of the US economy, jobs, and so on. That's always one end. Listen, health and safety of our employees always comes first. Before we even think about that. I always tell people the profits of VMware will wait if you are not well, if your loved ones not well, if your going to take care of people, take care of that first. We will be fine. This too shall pass. But if you're healthy, let's turn our attention because we're not going to just sit at home and play games. We're going to serve our customers. How do we do that? A lot of our customers are adjusting to this new normal. As a result, they have to either order devices with a laptop, screens, things of those kinds, to allow a work-from-home environment to be as close to productive as they work environment. So I expect that there will be a surge in the, sort of, end points that people need. I will have to see how Dell and HP and Lenovo, but I expect that they will probably see some surge in their laptops. As people, kind of, want those in the home and hopefully their supply chains are able to respond. But then with every one of those endpoints and screens that we need now for these types of organizations. You need to manage them, end point management. Often, you need virtual desktops on them. You need to end point security and then in some cases you will probably need, if it's a remote office, branch office, and into the home office, network security and app acceleration. So those Solutions, end point management, Workspace ONE, inclusive of a full-fledged virtual desktop capability That's our product Workspace ONE. Endpoint Securities, Carbon Black and the Network Platform NSX being software-defined was relegated for things like, load balancers and SDWAN capabilities and it's kind of almost feels like good, that we got those solutions, the last three, four years through acquisitions, in many cases. I mean, of course, Airwatch and Nicira were six, seven, eight years ago. But even SD-WAN, we acquired Velocloud three and a half years ago, Carbon Black just four months ago, and Avi in the last year. Those are all parts of that kind of portfolio now, and I feel we were able to, as customers come to us we're not going in ambulance-chasing. But as customers come to us and say, "What do you have as a work-at-home "for business continuity?" We're able to offer them a solution. So we did a webcast earlier this week. Where we talked about, we're calling it work in home with business continuity. It's led with our EUC offerings Workspace ONE. Accompanied by Carbon Black to secure that, and then underneath it, will obviously be the cloud foundation and our Network capabilities of NSX. >> Yeah, so I want to double down on that because it was not, the survey results, showed it was not just collaboration tools. Like Zoom and WebEx and gotomeeting Etc. It was, as you're pointing out, it was other infrastructure that was of VPN's. It was Network bandwidth. It was virtualization, security because they need to secure that work-from-home infrastructure. So a lot of sort of, ancillary activity. It was surprising to me, when I saw the data, that 21% of the CIO's that we surveyed, said that they actually plan on spending more in 2020 because of these factors. And so now we're tracking that daily. And the sentiment changes daily. I showed some other data that showed the CIO sentiment through March. Every day of the survey it dropped. Okay, so it's prudent to be cautious. But nonetheless, people to your point aren't just sitting on their hands. They're not standing still. They're moving to support this new work-from-home normal. >> Yeah, I mean listen, I forgot to say that, Yeah, we are using the video collaboration tools. Zoom a lot. We use Slack. We'll use Teams. So we are, those are accompanied. We were actually one of the first customers to use Zoom. I'm a big fan of my friend Eric Yuan and what they're doing there in modernizing, making it available on a mobile device. Just really fast. They've been very responsive and they reciprocated by using Workspace ONE there. We've been doing ads joined to VMware and zoom in the market for the last several years. So we're a big fan of their technology. So far be it from me to proclaim that the only thing you need here's VMware. There's a lot of other things on the stack. I think the best way, Dave, for us that we've sought to do this is again, I'm very sensitive to not ambulance-chase, which is, kind of go after this. To do it authentically, and the way that authentically is to be, I think Satya Nadella put this pretty well in an interview he did yesterday. Be a first responder to the first responder. A digital first responder, if I could. So when the, our biggest customers are hospital and school and universities and retailers and pharmacies. These are some of our biggest customers. They are looking, in some cases, actually hire more people to serve their communities and customers. And every one of them, as they , hire new people and so and so on, will I just naturally coming to us and when they come to us, serve them. And it's been really gratifying Dave. If I could read you the emails I've been getting the last few days. I got one from a very prominent City, the United States, the mayor's office, the CTO, just thanking us and our people. For being available who are being careful not to, we're being very sensitive to the pricing. To making sure customers don't feel like, in any way, that we're looking at the economics of it will always come just serve your customer. I got an email yesterday from a very large pharmacy. Routinely we were talking to folks in the, in the healthcare industry. University, a president of a school. In fact, Southern New Hampshire University, who I mentioned Jim Cramer. Sent me a note saying, "hey, we're really grateful you even mentioned our name." and I'm not doing this because, Southern New Hampshire University is doing an incredible job of moving a lot of their platform to online to help tens of thousands. And they were one of the early customers to adopt virtual desktops, and the cloud desktops, and the services. So, as we call. So in any of these use cases, I just tell our employees, "Be authentic. "First off take care of your families. "It's really important to take care of your own health and safety. But once you've done that, be authentic in serving our customers." That's what VR has always done. From the days of dying green, to bombers, to Pat, and all of us here now. Take care of our customers and we'll be fine. >> Yeah, and I perfectly understand your sensitivity to that notion of ambulance-chasing and I'm by no means trying to bait you into doing that. But I would stress, the industry needs you and the tech it-- many in the tech industry, like VMware, have very strong balance sheets. They're extremely viable companies and we as a community, as an industry, need companies like VMware to step up, be flexible on pricing, and terms, and payment, and things like that nature. Which it sounds like you're doing. Because the heroes that are on the front lines, they're fighting a battle every day, every hour, every minute and they need infrastructure to be able to work remotely with the stay-at-home mandates. >> I think that's right. And listen, let me talk a little bit of one of the things you talked about. Which is financing and we moved a lot of our business to increasingly, to the cloud. And SaaS and subscription services are a lot more radical than offer license and maintenance. We make that choice available to customers, in many cases we lead with cloud-first solutions. And then we also have financing services from our partners like Dell financial services that really allow a more gradual, radibal payment. Do people want financing? And , I think if there are other scenarios. Jim asked me on his show, "What will you do if one of your companies go bankrupt?" I don't know, that's an unprecedented, we didn't have, we had obviously, the financial crisis. I wasn't here at VMware during the dot-com blow up where companies just went bankrupt in 2000. I was at Informatica at the time. So, I'm sure we will see some unprecedented-- but I will tell you, we have a very fortunate to be profitable, have a good balance sheet. Whatever scenario, if we take care of our customers, I mean, we have been very fortunate to be one of the highest NPS, Net promoter scorer, companies in the industry. And , I've been reaching out to many of our top customers. Just a courtesy, without any agenda other than, we're just checking in. A friend in need is a friend indeed. It's a line that I remembered. And just reach out your customers. Hey listen. Checking in. No, other than can we help you, if there's anything and thank you, especially for ones who are retailers, pharmacies, hospitals, first responders. Thank them for what they're doing to serve many of their people. Especially people in retail. Think about the people who have to go into warehouses to service us, to deliver the stuff that comes to our home. I mean, these people are potentially at risk, but they do it. Put on masks. Braving health situations. That often need the paycheck. We're very grateful for that, and our hope is that this world situation, listen, I mentioned it on on TV as a kind of a little bit of a traffic jam. I love to ski and when I go off and to Tahoe, I tell my family, "I don't know how long it's going to take." with check up on Waze or Google Maps and usually takes four hours, no traffic. Every now and then it'll take five, six, seven. Worst case eight. I had some situation, never happen to me but some of my friends would just got stuck there and had to sleep in their car. But it's pretty much the case, you will eventually get there. I was talking to my dad, who is 80, and he's doing well. And he said, this feels a little bit like World War Two because you're kind of, in many places there. They had a bunker, shelter. Not just shelter in place, but bunker shelter in that time. But that lasted, whatever five, six years. I don't think this is going to last five, six years. It may be five, six months. It might be a whole year. I don't know. I can guarantee it's not going to be six years. So it won't be as bad as World War two. It certainly won't be as bad as the Spanish Flu. Which took 39 people and two percent of the world. Including five percent of my country, India in the 1918 to 1920 period, a hundred years ago. So we will get through this. I like, we shall overcome. I'm not going to sing it for you. It's one of my favorite Louis Armstrong songs, but find ways by which you encourage, uplift people. Making sure, it is tough, it is very tough times and we have to make sure that we get through this. That jobs are preserved as best as we can because that's the part I'm really, really concerned about. The loss of jobs and how we're going to recover as US economy, but we will make it through this. >> Yeah, and I want to sort of second what you're saying. That look, I know there are a lot of people at home that going a little bit stir crazy and this, the maybe a little bit of depression setting in. But to your point, we have to be empathic for those that are suffering. The elderly, who are in intensive care and also those frontline workers. And then I love your optimism. We will get through this. This is not the Spanish Flu. We have, it's a different world, a different technology world. Our focus, like many other small businesses is, we obviously want to survive. We want to maintain our full employment. We want to serve our customers and we, as you, believe that that is the recipe for getting through this. And so, I love the optimism. >> And listen, and we can help be a part of my the moment you texted me and said, "Hey, can I be in your show?" If it helps you drive, whatever you need, sponsorship revenue, advertising. I'm here and the same thing for all of our friends who have to adjust the way in which the wo-- we want to be there to help them. And I've chosen as best as I can, in terms of how I can support my family, the sort of five, five of us at home now. All fighting over bandwidth, the three kids, and my wife, and I. To be positive with them, to be in my social media presence, as best as possible. Every day to be positive in what I tweet out to the world And point people to a hope of what's going to come. I don't know how long this is going to last. But I can tell you. I mean, just the fact that you and I are talking over video interview. High fidelity, reasonably high fidelity, high bandwidth. The ability to connect. I mean it is a whole lot better than a lot of what happened in World War 2 or the Spanish flu. And I hope at the end of it, some of us, some of this will forever change our life. I hope for for example in a lot of our profession. We have to travel to visit customers. And now that I'm building some of these relationships virtually. I hope that maybe my travel percentage will drop. It's actually good for the environment, good for my family life. But if we can lower that percentage, still get things done through Zoom calls, and Workspace ONE, and things of those kinds, that would be awesome. So that's how I think about the way in which I'm adapting my life. And then I set certain personal goals. This year, for example, we're expanding a lot of our focus in security. We have a billion dollar security business and we're looking to grow that NSX, Common Black, Workspace ONE, and accompanying tools and I made it a goal to try and meet at all my sales teams. A thousand C-ISOs. I mean off I know a lot of CIO's in the 25 years, I've had, maybe five, six thousand of them in the world. And blessed to build that relationship over the years of my SAP and VMware experience, but I don't know. I mean, I knew probably 50 or 100. Maybe a few hundred CISO's. And now that we have a portfolio it's relevant to grant them and I think very compelling across network security and End Point security. We own the companies with such a strong portfolio in both those areas. I'm reaching out to them and I'm happy to tell you, I connected, I've got the names of 1,000 of the top CISO's in the Fortune 1000, Global 2000, and connecting with many of them through LinkedIn and other mixers. I hope I talked to many of them through the course of the year. And many of them will be virtual conversations. Again, just to talk to them about being a trusted advisor to us. Seeing if we can help them. And then of course, there will be a product pitch for NSX and Carbon Black and how we're different from whoever it is, Palo Alto and F5 and Netscaler and the SD line players or semantic McAfee Crowdstrike. We're differentiated so I want to certainly earn some of the business. But these are ways in which you adjust to a virtual kind of economy. Where I'm not having to physically go and meet them. >> Yeah, and we share your optimism and those CISO's are, they're heroes, superheroes on the front line. I'll tell ya a quick aside. So John Furrier and I, we're in Barcelona. When really, the coronavirus came to our heightened awareness and John looked at me and said, "Dave we've been doing digital for 10 years. "We have to take all of the software that we've developed, "all these assets and help our customers pivot." So we share that optimism and we're actually lucky to be able to have the studios and be able to have these conversations with you guys. So again, we share that, that optimism. I want to ask you, just on guidance. A lot of companies have come out and said we're not giving guidance anymore. I didn't see anything relative to VMware. Have you guys announced anything on guidance in terms of how you're going to communicate? Where are you at with that? >> No, I think we're just, I mean listen, we take this very carefully because of reg FD and the regulations of public company. So we just allow the normal quarterly ins. And of outside of that, if our CFO decides they may. But right now we're just continuing business as usual. We're in the middle of our, kind of, whatever, middle of our quarter. Quarter ends April. So work hard do the best we can in all the regions, be available for all of our teams. Pat, myself, and others we're, to the extent that we're healthy and we're doing well, but thank God, is reach out to CISO's and CIO's and CTO's and CEOs and help them. And I believe people will spend money. The questions we have to go over. And I think the stronger will survive. The companies with better balance sheet and unfortunately, some of the weaker companies won't. And I think quite frankly, if you do your job well. I don't mean this in any negative sense. The stronger companies will take share in these environments. I was watching a segment for John Chambers. He has been through a number of different, when I know him, so an I have, I've talked to him about some of the stuff. He will tell you that he, advises is a lot of his companies now. From the experiences he saw in 2008, 2001, in many of the crisis and supply chain issues. This is a time where leadership counts. The strong get stronger. Never waste a good crisis, as Winston Churchill said. And as you do that, the strong will come strong because you figure out ways by which, if you're going to make changes that were planned for one or two years from now. Maybe a good time to make them is now. And as you do that you communicate a vision for where you're going. Very clearly to your employees. Again incessantly over and over again. They, hopefully, are able to repeat it in their own words in a simple fashion, and then you get all of your employees in our case 30,000 plus employees of VMware lined up. So one of the things that we've been doing a lot of these days is communicate, communicate, communicate, internally. I've talked a lot about our communication with customer. But inside, our employees, we do calls with our top leaders over Zoom. Calls, intimate calls, and many, often we're adjusting to where I'll say a few words. I have a mandatory every two week goal with all of my senior most leaders. I'll speak for about five minutes and then for the next 25 minutes, the top 12, 15 of them I listen. To things, I want all of them to speak up. There's nobody who should stay silent, because I want to hear what's going on in that corner of the world. >> But fantastic Sanjay. Well, I mean, Boeing, I heard this morning's going to get some support from the government. And strategically that's very important for our country. Congress finally passed, looks like they're passing that bill, and support which is awesome. It's been, especially for all these small businesses that are struggling and want to maintain full employment. I heard Steve Mnuchin the other day saying, "Look, we're talking about two months of payroll "for people if they agree to keep people employed. "or hire them back." I mean the Fed. people say, oh the FED is out of arrows. The Feds, not out of arrows. I mean, I'm not an economist either. But the Fed. has a lot of bullets in their gun, as they say. So Sanjay, thanks so much. You're an awesome leader and really an inspirational executive and a good friend so thank you so much for coming on theCUBE. >> Dave, always a pleasure. Please say hi to all of my friends, your co-anchors, and the staff at CUBE. Thank them for all their hard work. It's a pleasure to talk to you this morning. I wish you, your family, and your friends and all of our community, stay safe and be well. >> Thank you Sanjay and thank you for watching everybody. This is Dave Vellante for the cube and we'll see you next time. (soft music)

>> Announcer: Live from Barcelona Spain, it's theCUBE. Covering Cisco Live 2020. Brought to you by Cisco and its ecosystem partners. >> Hello everyone, welcome to theCUBE here live in Barcelona Spain for Cisco Live 2020. This is our first CUBE event for the year. Next 10 years of CUBE history, we look back 10 years since we've been around, for 10 years, we have another 10 more we're looking forward to. And this is the first event for 2020 Cisco Live at Barcelona. I'm John Furrier, your host, with Dave Vellante, Stuart Miniman, extracting the signal from the noise. The cloud business is noisy, the networking business is under siege and changing, Dave and Stu we're pre gaming, Cisco Live, kicking off the show, end of the first kind of pre day, Tomorrow's the big keynotes. David Geckler, Verizon exec is preparing to announce rumor has it some insights into what Cisco's position will be vis a vis cloudification, that's going to change their portfolio and probably identify some opportunities, and also some potential gaps in their strategy and what they can do to be competitive. The number one leader in networking, they got a great market position. But cloud is changing the game with networking. >> Yeah, john, it's funny, I heard you talking about, the 10 years and everything. 10 years ago, if I thought about Cisco, I'd be looking at the I pattern of getting the jitter out of the network and trying to tweak everything. And today, what are we talking about with Cisco? We're talking about software, we're talking about cloud. We're talking about developers. Yeah, they're a networking company at its core, but Cisco has been going through a significant transformation, it's been an interesting one to watch. Dave, you wrote a little bit about, Cisco is one of the four horsemen of the internet era, of course the dotcom, they were one of the ones that actually survived and thrived after the dotcom burst, but Cisco is a very different company today far from the $500 billion market cap that they had a few years back, they were at about $200 billion, but still dominant in switching and routing. But there are threats from a number of environments and a lot of changes as to what you need to think about when it comes to Cisco. >> Well, sometimes it's instructive to look back and see how we got here. Cisco made three big bets during its ascendancy, the first one was it bet on IP, I mean, John, you've talked about this a lot, it decimated the mini computer industry by connecting distributed computing and client server, the underlying plumbing there. The second big bet it made was it trained a bunch of engineers, the Cisco certified engineers CCIEs, and they used that as a lever and created a whole army of people that were Cisco advocates, and that was just a brilliant move. And the third was under the leadership of John Chambers, They did about 180 acquisitions, and they were quite good at acquisitions and what that did for them is it continued to fuel growth, it filled in gaps and it kept them relevant with customers. Now, part of that, too, was, Chambers had dozens and dozens of adjacent businesses, remember, he said they were all going to be a billion dollars. Well, most of them, didn't pan out. So they had to cut and burn, and so but now under the leadership of Roberts, they're a much more focused company, kind of getting back to basics, trying to bet on sure things and so let's talk about what some of those sure things are and how Cisco's performing. >> Well it's clear you said lever, they're got to pull a lever at some point and turn the boat that is Cisco, aircraft carrier, what do you want to call it? In the right direction? That's been something that, we've been covering Cisco for decades Stu as you just pointed out, and while we've been close to all the action, I think Cisco knows what's going on. It's clear to me that they kind of understand the landscape. They understand their opportunities in the future, but they're a massive business, Dave, you pointed it out. The combination of all those mergers. The thing that got my attention was as they understood the unification many, many years ago in the compute side, you saw Cisco clearly understands the unification. They know cloud is here, they know that do not make a move, that's cloud friendly, they were going to get swept away and be adrift with the next wave, which is cloud 3.0, whatever we call it. So to me, that's the big story with Cisco. What is the impact of the company when you cloudify business? That's not public cloud, that's hybrid public, economics are changing, the compute capabilities are changing, the network capabilities are changing, got the edge. I think Cisco will be defined by their actions over the next two to three years. What they announce, how they position it, and what they bring value to the customers because you got Silicon One chip, good move, got cloud position, got App D on the on the top of the stack, you got cloud center, they're trying to get to the cloud, but you can't do that until you have the subscription business, until you, can't do pricing by usage unless you have that model. So I think it's a brick by brick, but slowly they're doing it. We have to hear some things next year on Cisco, on how they're going to be true, cloud enabled? >> Well, software is a huge play for them, right? I mean, they've got it, because Cisco's been the dominant player in networking with two thirds of the market, I mean, they've sustained that for a decade plus, and it has allowed them to drive 60 plus percent gross margins for years and years and years, huge operating margin. So how are they going to continue that? Software is the key. And as you say, John, subscriptions is the cloud model that is critical for Cisco. Now they talk about 70% of their software business is subscriptions and annual recurring revenue, it's unclear really how big their software business is, they give hints, I'd peg it at about seven to eight billion last year, maybe growing to 10, 12 billion this year. So pretty sizable, but that's critical in terms of them driving the margins that they need to throw off free cash flow so they can invest in things like stock buybacks and dividends which prop up the stock. >> Well, the problem is you start chasing your tail on the stock price and or product TAMS and product revenue, you might actually miss the boat on the new product. So it's a balance between cannibalizing your own before you can bring in the new, and this is going to be the challenge with Cisco, when do they bite the bullet and say, "Okay, we got to get a position on this piece here "or that piece there, ultimately, "it's going to be about customers." And what do we know, public cloud succeeded with one data, hybrid cloud is a reality and people are executing specific technologies to do an operating model that's cloud And to me, the big wave for Cisco, in my opinion, is multi cloud, because that's not a technology. That's just, that's a value proposition, it's not so much a technology. >> Yeah, Dave, you mentioned a lot of the acquisitions that Cisco has done. In many ways, though, some of the areas where Cisco can be defined is the acquisitions that they didn't do. Cisco did not buy VMware, and were behind in the virtualization wave. And then they created UCS and that actually was a great tailwind for them, created their data center business. They did not end up buying Nicira, and yet, Nicira's done very well. But if you talk to most customers well, even if you're deploying NSX, whose hardware do you tend to have? Well, yes, sure, it might be Arista, might be somebody else's but Cisco still doing good, going well, so they haven't had, there hasn't been a silver bullet to kill Cisco's dominant, but how are they going to do without cloudification? The data center group has gone through a lot of challenges. If you look at they fumbled along with OpenStack, like many other companies did, they went through just as VMware really failed with VCloud Air, the cloud group inside of Cisco had, they had this large Cisco offering that for a couple of years, everybody's looking, I don't know, are you enabling service providers? What are you doing? Now they have management pieces, they're partnering with Google, Amazon, Azure, across the environments, they are heavily involved in Kubernetes and the service meshes. So it remains to be seen where Cisco will find that next Tam expansion to kind of take them to the next wave. >> But Stu, acquisition is a good piece. And what I think they got to do some M&A clearly and organic but the question is would Nicira have been successful at Cisco versus VMware. Look at the timing of that, I think VMware being bought would have been a home run. But Nicira, I don't think that succeeds at Cisco. I think that would be a bunch of knife fights internally. And Nicira would have been shifted up because what it was then and what it is now and VMware are two different things because VMware took it, and shaped it, that I don't think Cisco could have done it at that time, >> The success would have been a defensive move to keep VMware out. That would have been the nature of the success, but I think you're right, the infighting would have been brutal, but VMware wouldn't have Nicira. >> VMware, What they did when they bought Nicira is they spent the first three or four years just making it an extension of VMware. Now it's starting to become their multi Cloud Interconnect. And that's where we need to see Cisco be involved. Cisco's bought many companies that have promised to be multicloud management or that interconnecting fabric and they have not yet panned out. >> Well, security is the linchpin though here, they've made a bunch of acquisitions in security. And I've always said that they've got a position, their networking is the most cost effective, the highest performance and the most secure to connect multiple clouds to hybrid on-prem. And they're in a good position to do that. >> Well, I think I've always said this from day one, you guys know I'm harping on this, Stu and I, we High Five each other all the time when we say this, but back in the days in IT days, the heyday, if you were a network operator, network designer, network architect, you were the king, king or queen. So you had the keys to the kingdom. VMware is a legitimate threat to Cisco. They compete, and they talk about that all the time. But the question is, which community has the keys to the kingdom? Rhetorical question. >> Yeah, well John one point I made earlier, (John laughing) >> Okay, go ahead. >> I remember Pat Gelsinger got on stage and he's like, "Hey, here's the largest collection of network admins" and everybody's looking at him, what are you talking about Pat? When I talk to customers that are deploying NSX, it is mostly not the network team, it is the virtualization team, and they're still often fighting with the network team. But to your point, where I've seen some of the really smart network architects, and people building stuff, Amazon, Azure, Google all have phenomenal people, and they're building environment back Cisco needs to make sure they partner and are embedded there. >> If you, Dave mentioned the leverage. Cisco's got to pull that lever or, turn the boat around and one shift move now, or otherwise, they'll lose that leverage. They have more power than they think in my opinion, they probably do know, but they have the network. And I think the network guys trump the operating guys, because you always swap in operating staff, but you got the network, and the network runs the business. No one could swap out Cisco boxes for a Synopsis years ago, so or Bay, whatever it turned into, so they have that nested position. If they lose that they're done. >> Yeah, and I agree with you, John, there's a lot of, Stu, you pointed out this, people buy NSX and Cisco ACI, but my question is, okay, how long will that redundancy last? I think, to your rhetorical question, Cisco is sitting in the catbird seat and they know networking, they're investing in it. I don't think they're going to lose sight of that. Yeah, wrist is, common Adam and Juniper, but Cisco, they know how to manage that business and maintain its leadership. I guess my question is, have they lost that acquisition formula? Are they as good at acquisitions as they used to be? >> I think their old model's flawed for the modern era. I think the acquisition's got to come in and integrate and I think VMware has proven that they can do acquisitions right. I think that comes from the EMC kind of concept where it's got to fit in beautifully and have synergies right away. I think what Pat Gelsinger is doing I think he's smart and I think that's why VMware is so successful. They got great technical talent, they know the right waves to be on and they execute. So I think Cisco has got to get out of these siloed acquisitions, this business unit mindset and have things come in, if they work, in line with the strategy and the execution. It has to from day one, I've got it. You got to be fitting perfectly in. >> The portfolio is still pretty complicated. You got the core networking. You got things like WebEx, right? I mean, would you want to be going up against Microsoft Teams? But they're in it, Cisco's in it to win it, and they got to they got to talk about-- >> Don't count out Zoom. >> Talking about, no, Zoom's right there too in the mix. And so Cisco's got some work to do, expect some enhancements coming there, in HCI, they've got to walk a fine line Stu, you made this point. On the one hand, they've got, IBM and NetApp with UCS and conversion infrastructure, but then they buy Springpath, which is designed to replace converged infrastructure. So they've got to walk that fine line. >> All right, what are you guys going to hear this week? Let's just wrap this up by going down the line on thoughts and predictions as the keynote kicks off tomorrow, I took some notes, I was doing some, going around the floor trying to get inside people's heads and ask them probing questions. And here's what I got out of it. I think Cisco is going to recognize cloud and absolutely throw the holy water on the fact that it's part of their strategy. I think we'll hear a little bit about Silicon One and how it relates to the portfolio, but I think the big story will be how tying the application environment together with networking, not end to end but really as one seamless solution for customers. I think it's going to be a top story that's been teased out by some of the booths that I saw, connecting things as one holistic thing with application development focus with DevOps. >> Yeah, so John, ACI was application centric infrastructure. And it was critical back in back in the day there is like, well, the application owner really doesn't have much connection there. If you look at what Cisco has been doing the last few years, it is tying together more that application owner, the DevNet group that, we're sitting here in the DevNet zone, that connection between the developer and making enabling them as part of the business absolutely is a wave that Cisco needs to drive. I don't think we're going to see a ton of the Silicon One, 5G and that kind of stuff, if for no other reason then in about a month, they're going to be sitting here with 100,000 people from Mobile World Congress and that's where they keep their dry powder to make sure that they push that piece of it. But that is super important, so and yeah. >> I think, software and security, I mean, I, as you were talking about, Zoom, Teams, so they better focus on collaboration and I want to hear some stuff there, security, IoT and the edge. They've got a very strong position there. Their security, Cisco security business grew 22% last quarter, it's really doing well. So I want to hear more about that. And I think data center, what they're doing in the data center, what they're doing with their switching business, their HCI stuff and converged infrastructure, hyper converged and, three important areas that we'll hear about this week. >> And Dave, I'll emphasise on what you were saying. Edge edge edge, absolutely, if Cisco is going to maintain a dominant player in the network, they need to deliver on that edge. And I've heard a couple of messaging strategies in the past, there was fog computing and all this other stuff, but I think Cisco is in a position today between Meraki that they have between their core product, >> Dave: Devnet. >> To really be able to enable-- >> And those are really-- >> Well, I want to see more progress, I'm looking forward to see, I'm going to drill them on the interviews we do here. They spent millions, billions of dollars satisfying and creating a subscription model with the cloud. We're going to dig into it, we're going to extract the signal from the noise, theCUBE coverage here in Barcelona, Spain. First show of 2020, Cisco Live 2020, I'm John Furrier, Stuart Miniman, Dave Vellante. We'll be right back. (upbeat music)

>> Announcer: Live from Las Vegas, It's the Cube. Covering AWS reInvent 2019. Brought to you by Amazon Web Services and Intel along with its ecosystem partners. >> Welcome back everyone, we're live here in Las Vegas in the Cube for live coverage of Amazon reInvent 2019. I'm John Furrier here instructing the singer from the noise. We have an amazing guest here, the founder of Aviatrix, I mean the CEO of Aviatrix, Steve Mullaney. Welcome to the Cube, thanks for comin' out. >> Thank you, good to see you. >> So first of all, I want to get into your experience, because I think it's notable having you on, because you've been in the industry for years, you're CEO of a multicloud software, a new kind of company. And this is what Andy Jassy was talking about on his Keynote today, that there's new kinds of companies, there's the born in the cloud, then there's enterprises re-borning in the cloud, my word. It's actually pivoting or re-platforming, re-imagining, whatever you want to call it. This is the new game, and if you're not on that side of the street you could be out of business. >> Steve: Yeah, no we're definitely seeing that and I think that's the thing that really got me excited about a year ago, was watching enterprises make that transition and say you know what, the center of gravity has gone from architectures inside the on-prem data center, is now moved to in the cloud. That shift has happened, people talked about it five years ago, but they didn't mean it. Now when you talk to enterprises, they are actually moving into the cloud, not just talking about it. And they're saying that is the center of gravity. And what's interesting to me was, I think even just the tone of Andy Jassy today and what he was talking about was once you define what your architecture is, you push it everywhere. So cloud 1.0 and 2.0 was really more about taking my architecture that was on-prem and pushing it into the cloud. So let me take virtual clients, a virtual router, basically my hardware router, package it up, put it on the cloud. That's not cloud native, it's cloud naive as we talk, right? So the change that's happened is now everybody realizes that the center of gravity is in the cloud, and you start seeing things like outposts. You see things like wavelength, you see things like TGW network Manager and things getting pushed out. The architecture of the cloud, now actually pushing out and extending out into on premises. >> John: Well, I want to give you a prop for a couple things. One is, for the folks watching, and read my post about my interview with Andy Jassy, I said two things in there that I borrowed or stole from Steve. One was cloud native without the T is cloud naive. And T for trust, T for IT, that was clever. And we're going to get into that-- >> Well I stole that from our sales guy Harold Hilderbrand, so you know what? >> John: Harold shout out to you. The second thing that I heard used when we were talking, we were talking about transitions vs. transformations. I think that is so on point because I think that encapsulates what Jassy's saying and what the industry is feeling right now. Transitions are for incremental improvements, transformations are for flipping the script. >> Steve: Right, right. >> This is really happening. Can you share what you mean by transitions vs. transformations? >> Yeah, so when you're in a computing model, there's been really three computing models. There's mainframe, which was 50's or 60's, to 80's or 90's, there's a 20-30 year period where IBM, DAC and so forth. That was the way you did enterprise computing. Then this PC client server thing came along, which was viewed as a toy at the beginning. For print sharing and work groups and people said are you kidding me? PCs, Servers are just PCs with two power supplies. I'm not running my mission critical infrastructure on PCs. But in the 90's with the internet, IP protocol, it's shifted. That became that transformation. So incumbents never win transformations. DEC, IBM and what happens is they're never in the conversation, because it's a transformation. Incumbents always win transitions, so for the last 20 to 30 years, Cisco, great, fantastic company. Very respected company. John Jamers will talk about transitions and talk about he would pat himself on the back, and how they would win market transitions. You're supposed to win a market transition as an incumbent, don't pat yourself on the back. The customers will force you to win the transition because they don't want another leader when you're in that same model. We are now entering that third transformation, this a model of computing change. This is from the top down business transformation Andy was talking about, which is true. You have companies redefining who they are, and they are leveraging cloud technologies to do that. This is not a cost thing, this is not a bottoms up technology thing that IT guys just say ah I want to learn something new. This is top down business transformation, existential threat to the survival of my company kind of stuff, and we need to move fast, and enterprises all move together. That's now happening and transformations, that confusion creates opportunities, because it moves so fast that the legacy vendors just don't have time. They have the innovators dilemma, they can't move to the new way quick enough. >> Yeah and one of the things I want to get your thoughts on and I want to get your reaction to is as we go to all the events in cloud, in this business, we see everything, the one tell sign, for me, is the security market. Security got unbuckled out of IT, in the board conversation. The jewels are on the table, the security, if you get hacked you're out of business. Talk about threats to the business, security is the leading indicator. What's going on in security? They're building their own staff, they're hiring developers in house. They are really changing the game on how they use technology. That's just in one area. You're talking about a complete reset, or reconsideration of everything that Jassy said. >> Everything, yeah, it's the business, right? Your applications are your business, right? And then all the infrastructure underneath that is there to service the applications and the data, that's why it's there. When you talk to different people, and you talk to customers like NBC and CBS, and content people, they're moving to the cloud. They're now having channels that are 100% hosted on AWS for the first time. Why are you doing that? I asked this of CBS. Because we need to move faster. Guess what, they're competing with Netflix and Amazon. They can't do it the old way, they're going to die. So they're moving all of their channels, hundreds of channels to be now cloud enabled. Because it allows them to deliver it in months as opposed to years. >> Your really interesting background, I'll share with the audience, you have a networking background, the old WellFleet became Bay Networks. Early employee at Cisco, then went to early employee at Palo Alto Networks security company. CEO Of Nicira, which is a big pioneer in software-defined networking. Which, at the time, evolved into the crown jewels of AVMWare. >> Yep, in a sense. >> You would say I would agree with that. And now you're on Aviatrix where it's got a multi-cloud abstraction, so you're kind of riding this new wave. So the question I have for you is, I coined the term being reborn in the cloud. Not born in the cloud. People who are born in the cloud, clean sheet of paper, they can scale up. But an enterprise has got to transform. Has to become reborn with cloud architecture. >> Steve: Yes, yes. >> This is a fundamental, almost look in the mirror moment as an enterprise executive, saying are we being reborn? >> Yes. >> How do companies do that? >> So we have a number of companies, enterprise companies, that are 30 year old, 40 year old enterprise software companies that, honestly, were left for dead. Where people thought, they weren't SaaS. They missed out on the whole Benny Hoff SaaS movement and they were on-prem. They had all the features, all the functionality, but they didn't have the delivery model of SaaS. They were hurting, they were going to die. People left them for dead. Now what they are doing is they've reborn themselves, in the cloud. They are pushing themselves in the cloud. Informatic, Variant, Epsolon, Eluysian, Teradata. We've got tens of these companies, that are, have reinvented themselves and now they're actually doing really, really, well. Because they had the functionality that they've always had, but now they have the delivery mechanism. There not SaaS actually, and the customers like that. Because I get my own three or four VPCs, it's my own network, it's not multi-tenant. It's hosted within AWS and now they're just migrating as fast as they can, all of their on-prem applications of customers into AWS and other clouds. >> John: All right, so I want to ask you about multi-cloud. Jassy didn't use the word multi-cloud, the critics are tweeting away on that. But, of course he's going to say multi-cloud, he's the cloud. He's the one cloud, he wants to be. >> Yeah. >> Multi-cloud is a reality. He did point out in my interview, and I think he might have mentioned on stage, that people are picking up primary and secondary. And then it's not 50/50 it's 70/30, 90/10. Whatever the ratio is then just pick one. Amazon gets picked a lot for the leader. What's your vision and how do you see the multi-cloud playing out? As people start becoming more cloud operations based. >> My view, and people, we are in the first pitch in the first inning of this cloud and people say AWS is a 40 billion dollar run rate, how can that be? Because the money has always been and always will be with large enterprise. They are now just starting to move into the cloud. There's trillions of dollars of spend that's coming into public cloud. So, first off, it's very beginning, early days. Second thing is AWS has done incredibly well with the developers and the born in the cloud people. Enterprises, not so much. And, you know what? Microsoft kind of understands enterprises. So I think we're going to be set up for a little bit of battle here, and it's, by no means, over. So I think AWS recognizes that and every single enterprise that I have talked to says I may not be a third, a third, a third across all three of the big clouds. Maybe I'll have one primary, and I think Andy Jassy says that, which I kind of agree with. I think people will have a primary, but I don't think everyone's primary is going to be AWS. I think there's going to be a lot of Azure primaries. And even some Google primaries, probably more, and I think it will be a two horse race for that. But then they're going to use the other clouds because, I was just talking to a customer today. The signature recognition software runs better in Azure. They're an AWS customer, they're moving to Azure for this. Why, because that app runs better in Azure for some reason. I think people, particularly enterprises, will make that decision. >> All right, so I want to get your take on two things, first of all I agree with you. >> I think that's what will happen. >> I would agree with that, so let's just take this scenario. Amazon wins on capabilities, they're constantly adding new stuff everyday. So, if you're a builder, it's the ultimate tool shed for technology. Azure isn't there yet, they're trying to catch up as fast as they can, they're pedaling as fast as they can. But there's a build out level and then there's a consumption level. So there's having all that capability, but also the customer's consumption has to be addressed. Solutions packaging, ease of use. So delivery mechanisms for infrastructure in the cloud. The consumption, how I buy and use, is now a consideration. Or consumer experience or whatever you want to call it. What's your take on those two dynamics? >> I think you'll see, from AWS, I don't know this, but it has to be, because this is what enterprises want. The phrase 'Go Build' is great for an early adopter. You go tell that to an enterprise, here's the power tools, go build your house. They go, I'm going to cut my hand off. I don't want to go build anything, I want to consume. So I think you're going to see them changing their tune a little bit, because the markets evolved, and I think it's caught them a little bit by surprise as well. I think Microsoft, because they know the enterprise, they won't say 'Go Build'. They're going to say 'Come Consume'. And I think that's going to resonate with enterprises. Because, at the end of the day, they don't really want to do that. Now, either way, I think it's going to be a battle. That's where Aviatrix comes into play. We help enterprises, no matter what cloud you're on, across multiple clouds or one, actually consume services. So we abstract away all the details of those native services. >> Well, I would say, if you got to transform, you have to do some building, but it would have to be the easy kit. >> Steve: Yeah, I want the easy button, I mean. >> John: Paint by numbers. >> Yeah. >> John: Self-installing house. So I got your take on that. So you got a lot of buzz in the analyst community around a phrase I've heard you say. >> Steve: Which one is that? >> There's no more food left in the data center. >> Oh, okay, yeah. >> John: And the animals are leaving the data center. >> And that's right. >> John: Food being the supplier. >> The on-prem data center. >> John: The on-prem are money and the animals being the vendors. So if there's no food in the data center, what's happening? What does that mean? >> Steve: They're goin' through, the center of gravity has moved into the cloud, that's where the food is. So you're going to see a lot of cloud naive legacy vendors put cloud on things, right? It's the same crap they had, they're just going to put cloud on it because, like I said, what do animals do when they run out of food? They go find where the food is, right? If people get mad when I say that because data centers are not going away. I know that data centers aren't goin' away, but they're going to get quarantined like mainframes got quarantined. It's going to be an expense area, it's not going to be an investment. And what do you do with an expense? You quarantine it, you cap it, you hopefully keep it flat, or your reduce it. But, sure, the data centers are going to be around for a long time but all their market caps are based on big growth. And, where people are confused is, for the last five years, everybody said we are moving to cloud. But they were talking. So if you look over the last five years, all the people selling the on-prem have done very well. So, clearly, this whole cloud thing was a hoax, right? Because, for five years, you said it was coming and it hasn't, so therefore I'm good. The problem is you're good right up until you're not good and that just happened. >> And that's happening now in your opinion? >> That's happening now and your seeing it in peoples results, publicly. And they're washing it over. They're saying it's a temporary problem. I compensated the field wrong. Bullshit, I know what's going on and, you know what? There's going to be no hiding from that. >> Yeah, and the expansion's going to be in the cloud where the developers are building apps that drive top line. >> Steve: That's where all the investment's going. >> Okay so, there's a couple of major areas developing with the cloud dynamic. The cloud scale and now data tsunami and data scale. Diversity of data and all those things are happening. You can see that in the announcements. Large scale data, the data layer network, data ops, data as code, infrastructure as code, large scale, all that's great. But networking still becomes the fundamental problem. Jassy talked about it on stage. Hops to the network, they got this wavelength thing for 5G. That's really cool. All the kind of important things that are going on, is going on at the network. Same concepts being applied to a new architecture. >> Yeah. >> Your thoughts? >> Exactly right. One of our customers, I forget who it was, said a phrase to me that I love. Again I steal everything John. >> John: I steal from you. >> Yeah, he said the network comes first. I go that is perfect, I'm going to use that. In fact, actually it's on our website. The network comes first. Because when you're building up that infrastructure, in all of computing. Compute network and storage, what's the most important? Network by far. Why, because if the network isn't architected correctly, you're screwed for life. So you've got to get that right. So that's what everybody is doing right now. Is they look and they say strategically, we're going to go build a city. First thing I got to go and do is get the basic infrastructure, and the network comes first. That is the core of my basic infrastructure. If you get that wrong, life is bad for a long long time. That's what's going on right now. >> Okay, so you've had a great career, you got the CEO of Aviatrix going on. You're also looking at startups, you advise, been on boards. What's your view of the startup landscape if you're advising startups to go at this market, this trillion dollar enterprise market, the money's being thrown in the air and the money's in the middle of the table. How do they attack that money, how do they attack the marketplace? >> First thing, number one, you got to be cloud native. You have got to understand the basic native constructs of Azure, Google, AWS. You cannot be just this thing that plops on top of it, you got to be able to programmatically, program that infrastructure and leverage it. Because all of the hundreds of billions of dollars being spent, you want to use that, right. You don't want to have to go recreate that. So that, to me, is number one. And then number two, I think there's a lot of opportunity in the cloud. Everybody thinks AWS will do anything and everything you need in networking. That is a bunch of crap. There is so many limitations that they have for enterprises. Like hundreds of limitations. The beautiful thing with networking is you push one area, and ten other problems happen. So we've got 20 years of things to do to make networking better. So that's what we're going to do. But also at the edges, right? I would say where the interesting thing happens, is the interface between on-prem and cloud. So BGP, IOS, Cisco IOS, all the things that, because it's kind of like the virtual, the physical interface. It's the cloud to on-prem interface. There's still going to be an interface. >> John: You still need plumbing. >> Then there's still going to be an interface. That interface is where a lot of the complexity and friction comes. So whether it's IoT, edge computing type things, or things that we do of bringing that cloud in a seamless, kind of simple, automated way. Bringing on the on-prem into the cloud world in a very seamless way. >> John: So, I'm got to ask you a final question. You came out of retirement. You had the good life on boards, golfing, clipping coupons, going to the beach every day. Now you're the CEO of a company going grinding it out again. A lot of older ageism coming back into the biz. A lot of people who have been in the systems business. >> Steve: Oh yeah. >> A lot of people coming back into the game. Why did you come back, what was the main driver for you to come back out of retirement? >> 'Cause this is a thousand foot wave and it's ten times bigger than what I saw in client server. It's the biggest opportunity of value creation and innovation that I have ever seen and ever will see in my life. What's also fun is every single one of the customers that we are dealing with are all old guys like me. They're all 40s, 50s, 60s, it's the IT guys from 30 years ago that everyone left for dead. Everyone thought, oh it's the developer-led infrastructure, the developers are going to do everything, uh uh. This is IT, IT is coming back and saying thank you very much developer, we got it from here. This is serious business now. This isn't fun and games anymore. We're taking over. >> But it's serious IT, it's reborn IT, it's not the old IT. >> Not the old IT, they want to do it. It's the old guys. But they're enlightened guys and gals and they want to do it in the cloud way, with the simplicity and the automation. But yet I want to bring the functionality, visibility, and control that I had on-prem. I don't want to do it the old way. I want to do it the new way. Guy today I was just talking to a customer who said, I don't want to build my Dad's network. But he's 50 years old, he's my age, you know. And so, but I think that's the key, they're enlightened networking people, yet they have the 30 years of history of understanding the subtleties of BGP and networking. >> This was our chance to hear you in the Cube, we had such a great time, our team's awesome. It's our seventh year doing reInvent, eight years total of this conference. What's your take of Jassy's Keynote this year? Is this an inflection point? Is this one of those moments where you're going to look back and say this was a time that Amazon made a change, or gassed it extra hard? >> I think, my take is, look every year he says amazing things and every year is another step function. But I think this year will go down as the year that people will look back a couple of years from now and say that was the point, that it got serious, like really serious in terms of big enterprises coming in and I think it's going to send a message to the other public clouds, and a message to all the other enterprises that say hey, maybe I'm falling behind. When you see Goldman Sachs and you see banks are laggers to the cloud. They're not early adopters, they're laggers. You see that and you go well, wait a minute, maybe I'm missing out. I think it's going to actually accelerate because he's seeing it, you know. So I think it will go down as a big inflection point. >> John: Steve Mullaney, President and CEO of Aviatrix, who's going to, you'll be on Thursday to go over some of the stuff you guys do as a company. Appreciate the commentary, and great experience riding the wave. How high was that wave? >> A thousand foot. >> Thousand foot wave. We've been riding this wave for years. What a great time it is to be here at reInvent. Keep coverage, I'm John Furrier. We will be back with more coverage after this short break. Here in the Cube Intel Studios sponsored by Intel. Thanks to Intel for your generous contributions to making the Cube and supporting our mission. We really appreciate it. Thanks for watching, we've got the more coverage after this short break. (upbeat music) (upbeat music)

(upbeat music) >> Announcer: From New York, it's theCUBE. Covering ESCAPE/19. >> Everyone, welcome to theCUBE coverage here in New York City for the ESCAPE Conference 19. This is the inaugural event for multicloud, I think it's the first industry event for, really talking about multicloud and the impact to enterprises and public cloud. My next guest is Steve Mullaney, President and CEO of Aviatrix, storied career in tech, been there done that, seen many waves of innovation. Nicira, Palo Alto Networks, and now Aviatrix. You retired for a while, welcome back! >> I did, yeah, five years, yeah, yeah, yeah. >> Welcome to theCUBE. >> Thank you, thanks for having me. >> It's nice to have you on because I think you have a good perspective on the multicloud because you've been in the industry since the 80s. We've both been broke in at the same time. And we've seen the waves. >> Oh, yeah. >> This wave is bigger than, I think, most of the other waves combined because it brings together so many things, infrastructure, software, cloud scale, and a new modern application environment. And then you complicate everything by throwing IoT out there, edges being pushed to their boundaries, securities equations changed, all this is going on right now, all at the same time. >> No, and that's why I was basically retired for five years, and I was at Nicira, we got bought by VMware, I stayed there for a couple years, and I just said, "Okay, that's it!" I've had a good career and I'm done. And about a year ago, the world changed. And it felt like on a Tuesday morning, I noticed enterprises really, we'd been talking about cloud for 12 years. And five years ago they said, "We're coming in, we're going to do it," but they didn't really mean it. But about a year ago, all in the same day, every enterprise said, "No, now we actually mean it." And I don't know why, I don't know if it was just people retired or just five years of talking about it, they all decided, we're comin' in, and enterprises all moved together. And this wave, as you said, is bigger than, I was around in 1992, in the early 90s, in the movement from mainframe to client server. This is 10 times bigger than that. And more importantly, it's going to happen 10,000 times faster. Because (fingers tapping). What's that? I just deployed 62 data centers around the world. Because if I can leverage the greatest infrastructure built, basic infrastructure of the hyperscalers, AWS, Azure, Google, Alibaba, Oracle, you name it. It's unbelievable the velocity at which you can now start deploying. >> Steve, I think you're onto something big here, and this is why I'm here at this event and why I'm excited, that a lot of the industry thought leaders and practitioners and leaders are doing this event. Small events, inaugural, but I think it has a lot of links. Because there's a lot of tell signs that I like to look at, one is cloud. I've been covering Amazon eight years now, with theCUBE, I've known AWS since it started, and I've done many startups in its launch using AWS. But I've had many conversations with Andy Jassy, one on ones, privately, I got an exclusive coming up for re:Invent with him. I've gotten to know him. It started out, "Everyone's moving to the cloud. "Every data center's not going to exist." And then, you know-- >> Oh, maybe not, yeah, yeah. >> Maybe not, we'll do an output. So I challenged him last year, I said, "Andy, come on, dude, like you were saying like a year ago that." >> Steve: Yeah, it's all AWS or nothing. >> And he said, "John, look I'm not, "I just listen to the customers." And I interviewed him when he did the VMware deal. And he's very customer focused. And when they make these moves with outpost, and I think it's going to be a hybrid message this year at re:Invent, you know it's real. >> Steve: Oh, yeah. >> I think this validates your point, so I got to ask you, what specifically do you see the formula being for multicloud, because certainly everyone's recognized that there's a huge benefit for AWS. But from a scale standpoint, so why not use that? What's going on on the Enterprise on-premise that's making this new thing work? >> I think it all starts with architecture, like anything else. I think right now, enterprises have said, "Okay, we've burned a boat, right? "Now, we're not going to get rid of our data centers, "but in terms of our strategic investment, "we are moving into the cloud. "We are going to leverage "the infrastructure of the hyperscalers. "And whether that is just one hyperscaler, or multiple." And I have not met an enterprise who thinks there only going to be one, right, every single one of them. Now, I don't think they're moving workloads across, I don't think that. I think they see that, I'm going to use Google for AI, I'm going to use AWS because it started there. I'm going to use Azure, for Office 365, and other different things, and everything in infrastructure is always multi. It's never homogeneous, right, it's always that. So I think is going to happen, and I think what people are begging for right now, is, I want to build an architecture that gives me the optionality to be able to deliver a common set of services whether I'm on AWS or multiple clouds. And I want them to be my services and I don't want to have understand the low level abstractions and constructs of each of those clouds, because their all different. One's metric, one's U.S., one's some other weird thing. And I don't have the time, the people, or the resources to be able to do that. Give me a common set of services, that are my services, that I can deploy and abstract away the details of those public clouds. >> Yeah, it's an interesting point there, in fact, I called BS on multicloud last year when it started to kind of rear it's head, I'm like, "Come on, multicloud is bullshit." And I said that on theCUBE. And here's what I meant. Multicloud as an operating model is directionally correct, but the architecture hasn't shown where there's true multicloud. Now, the fact of the matter is, people have Amazon, people have Office and Office 365, that's technically two clouds, >> They're siloed, yeah. >> If they give us Google, that's three clouds. >> I use two or three clouds. >> So, if he have three clouds, I guess they have multiple clouds. But you bring up an interesting point, and going back as a student of the history of tech industry, multi-vendor has been a big deal. >> It is a big deal. >> And like you said, there will be a multi-vendor world, that will happen. The question is how. How do you guys see it happening? >> Well I think what's-- >> Your company is attacking this Aviatrix. >> What's interesting is, so now you think about from a customer perspective which, I do the same thing, same thing with AWS. It's always outside in. Okay, I'm thinking as a enterprise IT person. I'm making the move. Do you believe that your basic infrastructure will lever the hyperscalers, or will you build an on-prem? Everyone says, "I believe that's the way I'm going to go." Great, how do I do that? So, I'm a IT architect, who do I go to to help me? Do I go to CISCO? No. The most shocking thing for me, of the six months I've been at Aviatrix, is that word's never used. It's like it was DEC or IBM in the conversation, when you were talking about client-server, no, why would you? CISCO, Juniper, Arista, any of the networking people, not even in the conversation. VMware, not really in the conversation. So, I don't have any incumbent vendor that I can go to that I used to go to. >> Why aren't they in the conversation? 'Cause of the commodity, they've been extracted away? >> I think it's just because it's the innovation of dilemma. Right, once you're selling a lot of stuff into on-prem, to then go and say, I mean you look at Palo Alto Networks, they're trying to make that transition. Acquiring a bunch of companies, VMware acquiring a bunch of companies. Why are they doing that? Because they know, I got to get off on-prem, everything's going in the cloud. >> So it's a legacy. >> It's a legacy thing, and I think what happens is, there is only one reason, and one reason only, an enterprise customer is not using Aviatrix. 'Cause they never heard of us. That's why, that's the only reason. Once they hear about what they're doing, my God. >> Well, give the plug, talk about the company, what do you guys do-- >> So we deliver, I mean it sounds like I made it up for this conference, but actually this conference was perfect for this. It's networking and security services for the multicloud enterprise. And we're building an architecture, that people can deploy, that will give them this common architecture across all the different clouds. So whether you're just using one cloud or multiple, it doesn't matter, it's the same set of security and networking services. And we do that by embracing and extending the basic constructs that AWS, Google, Azure, and Oracle, and all the other clouds will give you, and to deliver that real enterprise class. Because the other thing we've found is, everyone thinks that the cloud gives you everything and anything you will ever need from networking and security. Let's say AWS, they're going to do everything I need. What the enterprises are figuring out, is once they start going in, what they realize is, it's created for the low-level common basic constructs. And the enterprise starts at, well, I need these BGP feature because guess what, the data center is not going away. And I need more than a hundred route limitations, and I need, all of a sudden there's fifty different limitations AWS will give me. Well, they didn't talk about that! Well, of course they're not going to talk about that. They are just going to go check, check, check, we solve all your problems. As enterprises now move in, with mission critical applications, they're realizing, I need the same level of networking and security services that I had on-prem. I can't get that with the native constructs. So where do I go? That's what we do, so we fill in, we embrace what we can of those constructs, we fill in holes where there are fill in holes. And then we give you the mechanism to be able to orchestrate that across the global network. >> So you operationalize the hyperscale clouds for enterprise, >> Yes. >> that's basically what you do. >> Steve: Exactly, for the enterprise. >> Yeah, exactly. >> On the level that they need. >> So you get the benefits of the cloud, but all those nuances under the cover details like networking and other features you abstract that away and provide an operating model for enterprise compliments. >> And the beautiful thing about it is the velocity, at which we can, we're over the top, effectively over the top. We're integrated into the Cloud Suite, understand what cloud native, we understand all the constructs of accounts, and all the things we need to do. But what we expose to the customer, to the enterprise, is a set of over-the-top services that just work. >> Okay Steve, so I got to ask you, since we are at The Multi-Cloud Conference. What is multicloud, I mean how do you define it, you laid out a pretty compelling architecture of what needs are, levers in the cloud, and on-prem is what Aviatrix does. But what is the definition, how should people understand what is multicloud? >> I think for us, for networking and security in that base, so we're basic infrastructure. We get out there first, right? So, if you're going to build a city, you don't start putting people there first the first thing, if you do it right, is you get sewers, you get electricity, gas, roads, all that. Networking and security, infrastructure, is basic infrastructure goes out first. And you want to create an architecture that's going to live with you for twenty years. You don't want to have to rip up the roads and put the sewers in later. And that architecture needs to be multicloud because, even though you think maybe, most of our customers are 90% AWS right now. But every single one of them say, "But I'm moving to Azure, I'm moving to Google, "I've got retail customers that won't allow me "to put my infrastructure on AWS." Or, "I have machine learning, AI type apps on Google." They all say that same thing. But what they all then say to us, is, "You're going to be the mechanism "upon which I'm going to be able to deploy "this common set of services." So they don't need to know that. >> All right, give an example of a customer you guys have, name a name, we had a customer on stage here-- >> Steve: So, Jefferies. >> John: They did this for a use case. >> Yeah so, Jefferies. Financial Services Institution, lots of requirements, Mark Leon Soon is going to be on stage with me tomorrow. We started working with them about nine months ago. Exactly the same thing, they said, "Okay, you know what? "We need to start moving to the cloud, "we've got to start leveraging the cloud. "But, it's too complicated, right? "Even AWS, says 'Go Build.' "I don't want to go build, I want to consume services. "But they don't have all the service that I needed, "they're too low a level. "They're very high function, high enterprise requirements." So they start using us to orchestrate things, to provide transit networking, to provide egress filtering out to the Internet, we have high performance encryption, AWS will only offer it one gig. We can offer it to 10, 20, 30, 40 gig. So they start deploying, they start realizing all the things we do. Then they go and say, "I want to bring my Palo Alto Networks firewall "into the cloud." When you start looking at that, 'cause then guess what? All my policies, I want the same level that I have on-prem when I'm in the cloud. If I go try to bring in my VM series into AWS the construct that AWS give you, they cause you limitations in performance, in visibility, It's integration hassles, there's performance, sustainability, visibility issues, they force you to use SNAT. And there's all these issues, and they go, "Oh my God, this is a pain in the ass." We solved all that for them. We basically cloudify the VM series for them, so all those limitations go away. So that's just another use case that they use. Now they start looking, and they say, "Okay, now I'm going to start extending into other clouds and I want to use you as the common frame point, the common pane of glass. >> Well Steve, good luck in your venture, you're back in the saddle again. >> Steve: Yeah. >> Another ride here, you feel good about it? >> This is going to be the best, the biggest that I've been, and I was at Palo Alto Networks and VMware Nicira. And this one's going to be bigger than both of those. >> What's your vision for where this is going to be for you, where do you see the company in a few years, what are some of the outcomes you expect to happen? >> Our opportunity, and I look at it as, someone's going to take this opportunity, and the reason I came back is, why not us, someone's going to take it. And the opportunity, honestly, is to become, effectively, what Cisco was in the early 90's. To define the architecture, the networking and the security infrastructure architecture for enterprise customers. They are begging for that right now, that's our opportunity. >> Cloud Interoperability. >> Interoperability, yeah. And so there's so many things that we need to go and do. When you look at also the thing that people are going to say, the operations. So many people think, I want it the same as it was on-prem. I think with the cloud, and across multicloud you can do it right with us, and actually better. Because the visibility that you get is more, than what you get on-prem. >> Well, and the thing that's interesting that's different about this new world that we're talking about is that there is going to be constant improvements in new things which means that the functionality game is going to increase, which means the agility is even more important because the apps are going to have more things to do. >> Yeah. I mean in the end, why do you want to go to cloud? I want to go to cloud 'cause I want it to be self-service and I want agility. I want my developers, I want everybody to be able to do things quicker because all of the sudden they say, "Let's go roll this out", and you want to be able to do it. >> Well, good luck on the new venture, Aviatrix, check 'em out, hot multicloud startup, growing, how many people do you have, put the plug in, >> 100. >> what are you guys looking for, are you hiring, give me a quick plug. >> We just hired a new VP at World Wide Sales, James Winebrenner, who was Viptela CEO, VP Sales in Cisco, hiring a tremendous amount of sales guys right now, we're closing on a $40 million Series C round next week, and we're hiring a lot of people. >> Good luck, we'll be following you Steve, thanks for coming on and sharing your insights. Again, multicloud, this is a shift that's happening, multicloud is just another word for multi-vendor, in a new modern era, this is what it has been in the technology industry, but a whole new world. This is theCUBE coverage here in New York City, ESCAPE/19, I'm John Furrier, thanks for watching. (upbeat music)

(upbeat music) >> Announcer: From New York, it's theCUBE. Covering ESCAPE/19. >> Everyone, welcome to theCUBE coverage here in New York City for the ESCAPE Conference 19. This is the inaugural event for multicloud, I think it's the first industry event for, really talking about multicloud and the impact to enterprises and public cloud. My next guest is Steve Mullaney, President and CEO of Aviatrix, storied career in tech, been there done that, seen many waves of innovation. Nicira, Palo Alto Networks, and now Aviatrix. You retired for a while, welcome back! >> I did, yeah, five years, yeah, yeah, yeah. >> Welcome to theCUBE. >> Thank you, thanks for having me. >> It's nice to have you on because I think you have a good perspective on the multicloud because you've been in the industry since the 80s. We've both been broke in at the same time. And we've seen the waves. >> Oh, yeah. >> This wave is bigger than, I think, most of the other waves combined because it brings together so many things, infrastructure, software, cloud scale, and a new modern application environment. And then you complicate everything by throwing IoT out there, edges being pushed to their boundaries, securities equations changed, all this is going on right now, all at the same time. >> No, and that's why I was basically retired for five years, and I was at Nicira, we got bought by VMware, I stayed there for a couple years, and I just said, "Okay, that's it!" I've had a good career and I'm done. And about a year ago, the world changed. And it felt like on a Tuesday morning, I noticed enterprises really, we'd been talking about cloud for 12 years. And five years ago they said, "We're coming in, we're going to do it," but they didn't really mean it. But about a year ago, all in the same day, every enterprise said, "No, now we actually mean it." And I don't know why, I don't know if it was just people retired or just five years of talking about it, they all decided, we're comin' in, and enterprises all moved together. And this wave, as you said, is bigger than, I was around in 1992, in the early 90s, in the movement from mainframe to client server. This is 10 times bigger than that. And more importantly, it's going to happen 10,000 times faster. Because (fingers tapping). What's that? I just deployed 62 data centers around the world. Because if I can leverage the greatest infrastructure built, basic infrastructure of the hyperscalers, AWS, Azure, Google, Alibaba, Oracle, you name it. It's unbelievable the velocity at which you can now start deploying. >> Steve, I think you're onto something big here, and this is why I'm here at this event and why I'm excited, that a lot of the industry thought leaders and practitioners and leaders are doing this event. Small events, inaugural, but I think it has a lot of links. Because there's a lot of tell signs that I like to look at, one is cloud. I've been covering Amazon eight years now, with theCUBE, I've known AWS since it started, and I've done many startups in its launch using AWS. But I've had many conversations with Andy Jassy, one on ones, privately, I got an exclusive coming up for re:Invent with him. I've gotten to know him. It started out, "Everyone's moving to the cloud. "Every data center's not going to exist." And then, you know-- >> Oh, maybe not, yeah, yeah. >> Maybe not, we'll do an output. So I challenged him last year, I said, "Andy, come on, dude, like you were saying like a year ago that." >> Steve: Yeah, it's all AWS or nothing. >> And he said, "John, look I'm not, "I just listen to the customers." And I interviewed him when he did the VMware deal. And he's very customer focused. And when they make these moves with outpost, and I think it's going to be a hybrid message this year at re:Invent, you know it's real. >> Steve: Oh, yeah. >> I think this validates your point, so I got to ask you, what specifically do you see the formula being for multicloud, because certainly everyone's recognized that there's a huge benefit for AWS. But from a scale standpoint, so why not use that? What's going on on the Enterprise on-premise that's making this new thing work? >> I think it all starts with architecture, like anything else. I think right now, enterprises have said, "Okay, we've burned a boat, right? "Now, we're not going to get rid of our data centers, "but in terms of our strategic investment, "we are moving into the cloud. "We are going to leverage "the infrastructure of the hyperscalers. "And whether that is just one hyperscaler, or multiple." And I have not met an enterprise who thinks there only going to be one, right, every single one of them. Now, I don't think they're moving workloads across, I don't think that. I think they see that, I'm going to use Google for AI, I'm going to use AWS because it started there. I'm going to use Azure, for Office 365, and other different things, and everything in infrastructure is always multi. It's never homogeneous, right, it's always that. So I think is going to happen, and I think what people are begging for right now, is, I want to build an architecture that gives me the optionality to be able to deliver a common set of services whether I'm on AWS or multiple clouds. And I want them to be my services and I don't want to have understand the low level abstractions and constructs of each of those clouds, because their all different. One's metric, one's U.S., one's some other weird thing. And I don't have the time, the people, or the resources to be able to do that. Give me a common set of services, that are my services, that I can deploy and abstract away the details of those public clouds. >> Yeah, it's an interesting point there, in fact, I called BS on multicloud last year when it started to kind of rear it's head, I'm like, "Come on, multicloud is bullshit." And I said that on theCUBE. And here's what I meant. Multicloud as an operating model is directionally correct, but the architecture hasn't shown where there's true multicloud. Now, the fact of the matter is, people have Amazon, people have Office and Office 365, that's technically two clouds, >> They're siloed, yeah. >> If they give us Google, that's three clouds. >> I use two or three clouds. >> So, if he have three clouds, I guess they have multiple clouds. But you bring up an interesting point, and going back as a student of the history of tech industry, multi-vendor has been a big deal. >> It is a big deal. >> And like you said, there will be a multi-vendor world, that will happen. The question is how. How do you guys see it happening? >> Well I think what's-- >> Your company is attacking this Aviatrix. >> What's interesting is, so now you think about from a customer perspective which, I do the same thing, same thing with AWS. It's always outside in. Okay, I'm thinking as a enterprise IT person. I'm making the move. Do you believe that your basic infrastructure will lever the hyperscalers, or will you build an on-prem? Everyone says, "I believe that's the way I'm going to go." Great, how do I do that? So, I'm a IT architect, who do I go to to help me? Do I go to CISCO? No. The most shocking thing for me, of the six months I've been at Aviatrix, is that word's never used. It's like it was DEC or IBM in the conversation, when you were talking about client-server, no, why would you? CISCO, Juniper, Arista, any of the networking people, not even in the conversation. VMware, not really in the conversation. So, I don't have any incumbent vendor that I can go to that I used to go to. >> Why aren't they in the conversation? 'Cause of the commodity, they've been extracted away? >> I think it's just because it's the innovation of dilemma. Right, once you're selling a lot of stuff into on-prem, to then go and say, I mean you look at Palo Alto Networks, they're trying to make that transition. Acquiring a bunch of companies, VMware acquiring a bunch of companies. Why are they doing that? Because they know, I got to get off on-prem, everything's going in the cloud. >> So it's a legacy. >> It's a legacy thing, and I think what happens is, there is only one reason, and one reason only, an enterprise customer is not using Aviatrix. 'Cause they never heard of us. That's why, that's the only reason. Once they hear about what they're doing, my God. >> Well, give the plug, talk about the company, what do you guys do-- >> So we deliver, I mean it sounds like I made it up for this conference, but actually this conference was perfect for this. It's networking and security services for the multicloud enterprise. And we're building an architecture, that people can deploy, that will give them this common architecture across all the different clouds. So whether you're just using one cloud or multiple, it doesn't matter, it's the same set of security and networking services. And we do that by embracing and extending the basic constructs that AWS, Google, Azure, and Oracle, and all the other clouds will give you, and to deliver that real enterprise class. Because the other thing we've found is, everyone thinks that the cloud gives you everything and anything you will ever need from networking and security. Let's say AWS, they're going to do everything I need. What the enterprises are figuring out, is once they stop going in, what they realize is, it's created for the low-level common basic constructs. And the enterprise starts at, well, I need these BGP feature because guess what, the data center is not going away. And I need more than a hundred route limitations, and I need, all of a sudden there's fifty different limitations AWS will give me. Well, they didn't talk about that! Well, of course they're not going to talk about that. They are just going to go check, check, check, we solve all your problems. As enterprises now move in, with mission critical applications, they're realizing, I need the same level of networking and security services that I had on-prem. I can't get that with the native constructs. So where do I go? That's what we do, so we fill in, we embrace what we can of those constructs, we fill in holes where there are fill in holes. And then we give you the mechanism to be able to orchestrate that across the global network. >> So you operationalize the hyperscale clouds for enterprise, >> Yes. >> that's basically what you do. >> Steve: Exactly, for the enterprise. >> Yeah, exactly. >> On the level that they need. >> So you get the benefits of the cloud, but all those nuances under the cover details like networking and other features you abstract that away and provide an operating model for enterprise compliments. >> And the beautiful thing about it is the velocity, at which we can, we're over the top, effectively over the top. We're integrated into the Cloud Suite, understand what cloud native, we understand all the constructs of accounts, and all the things we need to do. But what we expose to the customer, to the enterprise, is a set of over-the-top services that just work. >> Okay Steve, so I got to ask you, since we are at The Multi-Cloud Conference. What is multicloud, I mean how do you define it, you laid out a pretty compelling architecture of what needs are, levers in the cloud, and on-prem is what Aviatrix does. But what is the definition, how should people understand what is multicloud? >> I think for us, for networking and security in that base, so we're basic infrastructure. We get out there first, right? So, if you're going to build a city, you don't start putting people there first the first thing, if you do it right, is you get sewers, you get electricity, gas, roads, all that. Networking and security, infrastructure, is basic infrastructure goes out first. And you want to create an architecture that's going to live with you for twenty years. You don't want to have to rip up the roads and put the sewers in later. And that architecture needs to be multicloud because, even though you think maybe, most of our customers are 90% AWS right now. But every single one of them say, "But I'm moving to Azure, I'm moving to Google, "I've got retail customers that won't allow me "to put my infrastructure on AWS." Or, "I have machine learning, AI type apps on Google." They all say that same thing. But what they all then say to us, is, "You're going to be the mechanism "upon which I'm going to be able to deploy "this common set of services." So they don't need to know that. >> All right, give an example of a customer you guys have, name a name, we had a customer on stage here-- >> Steve: So, Jefferies. >> John: They did this for a use case. >> Yeah so, Jefferies. Financial Services Institution, lots of requirements, Mark Leon Soon is going to be on stage with me tomorrow. We started working with them about nine months ago. Exactly the same thing, they said, "Okay, you know what? "We need to start moving to the cloud, "we've got to start leveraging the cloud. "But, it's too complicated, right? "Even AWS, says 'Go Build.' "I don't want to go build, I want to consume services. "But they don't have all the service that I needed, "they're too low a level. "They're very high function, high enterprise requirements." So they start using us to orchestrate things, to provide transit networking, to provide egress filtering out to the Internet, we have high performance encryption, AWS will only offer it one gig. We can offer it to 10, 20, 30, 40 gig. So they start deploying, they start realizing all the things we do. Then they go and say, "I want to bring my Palo Alto Networks firewall "into the cloud." When you start looking at that, 'cause then guess what? All my policies, I want the same level that I have on-prem when I'm in the cloud. If I go try to bring in my VM series into AWS the construct that AWS give you, they cause you limitations in performance, in visibility, It's integration hassles, there's performance, sustainability, visibility issues, they force you to use SNAT. And there's all these issues, and they go, "Oh my God, this is a pain in the ass." We solved all that for them. We basically cloudify the VM series for them, so all those limitations go away. So that's just another use case that they use. Now they start looking, and they say, "Okay, now I'm going to start extending into other clouds and I want to use you as the common frame point, the common pane of glass. >> Well Steve, good luck in your venture, you're back in the saddle again. >> Steve: Yeah. >> Another ride here, you feel good about it? >> This is going to be the best, the biggest that I've been, and I was at Palo Alto Networks and VMware Nicira. And this one's going to be bigger than both of those. >> What's your vision for where this is going to be for you, where do you see the company in a few years, what are some of the outcomes you expect to happen? >> Our opportunity, and I look at it as, someone's going to take this opportunity, and the reason I came back is, why not us, someone's going to take it. And the opportunity, honestly, is to become, effectively, what Cisco was in the early 90's. To define the architecture, the networking and the security infrastructure architecture for enterprise customers. They are begging for that right now, that's our opportunity. >> Cloud Interoperability. >> Interoperability, yeah. And so there's so many things that we need to go and do. When you look at also the thing that people are going to say, the operations. So many people think, I want it the same as it was on-prem. I think with the cloud, and across multicloud you can do it right with us, and actually better. Because the visibility that you get is more, than what you get on-prem. >> Well, and the thing that's interesting that's different about this new world that we're talking about is that there is going to be constant improvements in new things which means that the functionality game is going to increase, which means the agility is even more important because the apps are going to have more things to do. >> Yeah. I mean in the end, why do you want to go to cloud? I want to go to cloud 'cause I want it to be self-service and I want agility. I want my developers, I want everybody to be able to do things quicker because all of the sudden they say, "Let's go roll this out", and you want to be able to do it. >> Well, good luck on the new venture, Aviatrix, check 'em out, hot multicloud startup, growing, how many people do you have, put the plug in, >> 100. >> what are you guys looking for, are you hiring, give me a quick plug. >> We just hired a new VP at World Wide Sales, James Winebrenner, who was Viptela CEO, VP Sales in Cisco, hiring a tremendous amount of sales guys right now, we're closing on a $40 million Series C round next week, and we're hiring a lot of people. >> Good luck, we'll be following you Steve, thanks for coming on and sharing your insights. Again, multicloud, this is a shift that's happening, multicloud is just another word for multi-vendor, in a new modern era, this is what it has been in the technology industry, but a whole new world. This is theCUBE coverage here in New York City, ESCAPE/19, I'm John Furrier, thanks for watching. (upbeat music)

>> From the SiliconANGLE media office in Boston, Massachusetts, it's theCUBE. Now here's your host, Stu Miniman. (techy music) >> Hi, I'm Stu Miniman, and welcome to a special CUBE conversation here in our Boston area studio. Happy to welcome to the program first time guest, Patrick Morley, who's the CEO of Carbon Black. Of course, recently announced acquisition by VMware of $2.1 billion. Patrick, thanks so much for joining us. >> Stu, thanks for having me. >> All right. So, you know, we love digging into tech. There is no hotter space than security, you know? All the cybers are, you know, really exciting stuff, and even your company's Waltham-based. >> That's right. >> So actually a little closer to Boston than we are here in Marlborough, Massachusetts. When we had a green screen we used to kind of fake it with the skyline, but you know, the Boston area people know more than just Massachusetts Tech, but you know, a lot of, you know, great technology in Boston of course, you know? A lot of good technologies, a lot of good schools that have driven things. You have been CEO since 2007 and have seen quite a bit. You know, merger, Bit9 and Carbon Black many years ago, IPO, you know, not that long ago in the past, and now acquisition, as we said, for $2.1 billion. So, you know, give us a little bit of step back as to, you know, the journey, how we got here, and you know, what's it like to be kind of at the helm with your crew through, you know, all of those changes? >> Yep, well certainly very, very proud and very thankful to all of the customers that have been with us for many, many, many years. And as you said when you first started here, Boston is an awesome place for cybersecurity. I think I fits a bit of the personality on the East Coast, and if you just look at Boston in general there's a lot of great cybersecurity talent, a lot of great cybersecurity companies. And I'm extremely proud and grateful to all of my employees in Massachusetts who have built Carbon Black over the last number of years. And of course we have offices elsewhere across the globe, but Boston is, and Massachusetts is, where the companies roots really come from. And as you said, 2007 is when I joined the company. Obviously cyber was a very different world back then, and it's amazing if you just kind of roll back. In 2007, the idea of a CISO, of a chief information security officer, was still very new, and most companies we dealt with back then did not have a CISO, they had a network administrator or somebody, so that's all changed. If you look at security as a board-level issue, in 2007 there were certainly some areas of some sectors like the government where it had a lot of importance, but outside of that it did not have the same visibility as a strategic issue as it does now, it's been amazing. >> So much, you know, my background is networking and virtualization. I've spent a lot of time, you know, since 2007 looking at all the cloud world, and as I said, back in the early 2000s security was top of mind but often bottom of budget. You know, the network people, you know, back in the day it was like, "Can't you just lock the door," or you know, "Make sure the rack is secure," and you know, "Well we'll run things over Optical," and therefore we'll know if somebody splices into it from a networking standpoint. Today, as you stated, clearly it's a board-level discussion, CISOs, you know, rising power in the organization, and often dictating a lot of how the stack is built out there. >> Absolutely. >> So wow, bring us a little bit, you know, your portfolio. You know, security is not a thing. You know, any customer I talk to, they're like, you know, there is no such thing as a silver bullet in security. Most customers I talk to really think of security as a programmatic effort, so help us understand a little bit, you know, where Carbon Black fits today, and then we'll get into, you know, your, you know, broadened scope once you're going to be under VMware. >> Yeah, so the core founding idea behind Carbon Black was a simple one, which was that fundamentally the adversary was in a position where they eventually would figure out a way to get in, and if you fundamentally believe that then you do everything you can to stop the adversary, but you say, "I need telemetry. "I need data in order to understand what's happening across my environment in order to be able to see and stop the adversary." And so we began a journey to essentially be able to collect and analyze all the data that an adversary, that an attacker would touch in order to run their program, and you know, we always have equated it to essentially a movie camera that allows you to rewind the tape, and with all that data that we collect we can run tremendous analytics against that in order to be able to see and stop the adversary and understand what's happening across the environment. We essentially created a market that's now called EDR endpoint detection and response, and it's that simple idea of being able to understand and have situational analysis, situational visibility across the whole enterprise. We did that initially on-premise, so we did all that analytics, and each one of our customers' back-ends in their data center, and two years ago we began a journey to say, "Look, we want to do two things." One is we want to leverage that data to be able to provide more security capabilities across a platform, so let's revolutionize, continue to revolutionize cybersecurity by offering a cloud-based platform, we're going to move all of that analytics up into the cloud, all those capabilities up into the cloud, and offer a multi-tenant, cloud native SaaS platform, and over the last two years we've done that with multiple services now up on that cloud, with thousands of customers who are using it, and the benefits of the cloud are pretty straightforward, and they've revolutionized other industries, they're revolutionizing cyber right now. Certainly you can analyze data at a scale that's just not possible when that data's locked up in multiple customers, so that's one big change. Obviously-- >> Yeah, I just, to want to help unpack and tease out that data piece, because you know, we always hear out there it almost, you know, is a bit trite, you know, the importance of data. Data's the new oil, it's the rocket ship, but you know, the value of that data, how much of that is Carbon Black leveraging the data, how much can the customer themselves take advantage of that data, or you know, this isn't in a vacuum. There are other security products, other pieces of, you know, that vendor's stack that might be able to leverage that data. >> Yeah, well Carbon Black's cloud native platform, security platform, is built on a totally, it's totally open, so from an API basis, so you should, you should think about, our customers certainly think about it this way, as one, we're leveraging that data, we analyze a trillion security events a day, one trillion, just immense, and the benefit of that is if we see something across the globe that has a high risk score, that's known malware, that might be a new form of attack, that might be a living-off-the-land attack, all of our customers get the benefit of that analytic. So Carbon Black, we certainly leverage it, but in addition, the way we've built the platform, customers can get access to all the data from their enterprise, and they can correlate that data with other aspects of their security or their IT infrastructure in order to build a more holistic view across the entire enterprise, and we also have third party partners out there, managed security service providers and others, who also have access to that data for their customer set to be able to run analytics on it. So when we think about data, as you said, you know, as the oil of the new world, we need to leverage that data, but we also need, in this new world order, to give our partners and our customers the capabilities to do what they want with that data as well for their own data. >> Yeah, love that, especially if you're talking in that cloud native world it can't just be something that's locked up and only used in one environment. You know, we track the observability companies out there, you know, they have similar type of messaging. Of course data protection, you know, once there is that, you know, breach, you know, how do I recover from this information? So that ripple effect, and love, you know, openness, APIs, making sure that can be shared. You know, maybe not something that traditionally I'd heard from VMware when you talk about the openness and where they're doing maybe. I think there are a couple things you want to talk about Carbon Black, but why not get to the VMware piece, too? >> Yeah, I was just going to, on the cloud side, you know, the power of the cloud, obviously it's revolutionized other industries, and certainly one of it is the ability to provide analytics at scale. The other piece, which I already mentioned, is the network effect on my ability to see something somewhere across the globe and help millions of other customers across the globe when I see something, and the other piece is just my ability to deploy quickly and my ability to innovate quickly, because rather than having to deliver new software into each enterprise I can do that on my cloud native platform. So I think it positions the defender, the security teams around the globe where they can be more on the offensive than they've ever been before because suddenly I don't have to spend my time worrying about deployment mechanics or other pieces. I can focus on what I really want to do, which is I want to secure my environment, I want to be able to understand what the adversary might be doing. So we're real excited about what we've done over the last two years with our cloud platform. >> Okay, so the deal hasn't closed yet but it's announced that you will be leading up the cloud security group at VMware. Give us a little bit, you know, directionally, where's that heading, what will that mean? Of course we've tracked, you know, where VMware touches a lot of that environment, you know, with my background in networking I talked to the Nicira team before, and then through what's become a very successful NSX, Sanjay Poonen with the AirWatch acquisition and where they've gone. Of course I would expect that's the closest piece that you started out with the endpoint protection with that team, with the Workforce ONE. So explain kind of the security portfolio, and interesting, cloud security is the discussion because that's the newer piece of the Carbon Black portfolio. Help us understand how the whole, all the pieces fit together. >> Yeah, so first I'll just reiterate what you said, which is the transaction's not yet closed, so everything I'm talking about is pre-closed, and obviously post-close we'll have additional commentary about what everything will look like. But absolutely we are very, my team, my customers, we announced the transaction a little over a month ago. Everyone was really, really excited, and I think fundamentally they're excited because organizations understand what Carbon Black delivers today, and what we deliver are great security products, and increasingly the majority of those products are in the cloud. And VMware has a tremendous reputation in the industry for the technical capabilities, for the value that they provide to customers, and just for the breadth of the portfolio that they have. You mentioned a few of them, right? And many organizations and people think about VMware from a virtualization standpoint. But increasingly over the last few years they've dramatically expanded their portfolio, network virtualization, and the NSX, the Workspace ONE as well, which was based on the AirWatch acquisition they did. Those are big businesses today, and they're helping organizations transform their infrastructure, the way they manage devices, et cetera. And so Carbon Black, on the security side, we've been partnered with VMware for the last couple of years. We've had an opportunity to get to know each other quite well. We've had an opportunity to integrate in two key spots. One, we've integrated with their App D capabilities, which you can think about essentially as helping to protect and provide telemetry for what's happening inside of the virtualized environment. And then secondarily, we've also partnered with Workspace ONE as well, again more on the device side. Those are two natural points where security, building security intrinsically into that compute stack, we've seen with customer reaction, has a fundamental impact on being able to have security right there rather than having to bolt it on afterwards. >> Yeah, you walk into an interesting configuration. First of all, you know, as you said VMware not thought of as a security company per se, lots of products that absolutely fit in the security space and are there. When you look out, of course VMware, you know, primarily owned by Dell, there's Secureworks, there's RSA, those are well known security brands. You know, how, give us how you think of how all those pieces go together and kind of the trajectory of where things are headed. >> Yeah, well goal number one, once we close the transaction, goal number one is to do two things. One, we're going to continue to drive forward with the cloud roadmap that we have. It's an aggressive road map we've been innovating aggressively over the last couple of years and we're going to continue to do that within VMware. The second piece is obviously to maximize the opportunity to build security into the compute stack of VMware, so that when customers think about security they don't have to think about it as a separate piece, but it's already there at their fingertips. And then as you mentioned, so those are two big goals right there, and as you mentioned obviously Dell has a large portfolio. There's other security products within the Dell portfolio, and you know, when we think about that obviously over time we're already partnered with some of those. Secureworks, for example, has been a very close and valuable part of Carbon Black's for many years. You'll see us continue to partner. There's other parts of the Dell family where we have partnered in the past, not tightly, but I think we'll have the opportunity to do more as part of the Dell family. All of this means for customers more value, because rather than having to go and figure it out themselves we're going to be delivering it in conjunction with the solutions they're already using. >> All right, Patrick, I want to help you, have you address a schism I see in the marketplace when it comes to the messaging around security. When peers of mine went to the RSA conference this year they came back almost unanimously with two words, doom and gloom. >> (laughing) Right. >> In Boston this year Amazon held the inaugural re:Inforce, positioned itself as the, you know, cloud security conference for the industry. We covered that, you know, both of those shows with theCUBE, and Stephen Schmidt from AWS said the state of cloud security is strong. VMware, very much we hear from Pat, you know, we need to do over, security's broken. Friends of mine in the security industry, and Carbon Black's been around since 2002, is you know, come on, you know, it's not just another acquisition, it's going to be a point product. You know, yes we have work to do as a whole, but you know, saying we need a do over or it's broken is a between hyperbolic from my peers in the industry, so what is the state of the industry, is there traditional storage and cloud storage is all rainbows and unicorns, or you know, where do you see it today? Of course we know as an industry there's always work to do, but you know, how do you round that circle? >> Yeah, I would take it, and you're right, by the way, I hear all the same commentary, and I think we have to take a step back and just look at industry, the industry in general, look at security in general. We started the interview talking about well, what was the world like in security in 2007? Security has gone from, "Hey, it's a niche area over here "and we know it's important but don't talk to us," to super strategic, again, at a board level, at a company level, and so that rapid growth has driven a lot of funding into the environment, a lot of vendors, there's over 5,000 security vendors out there today, all competing. I don't know how CISOs and CIOs and practitioners really figure out who does what, it's very challenging, and at the same time you've got the adversary, this third party continuing to advance their attack types using new techniques. You've got ransomware, which is a huge industry now, driving billions of dollars, so you have all of that happening, and so in hyper growth environments like that you get a lot of vendors. The average enterprise security team has 75 different products, and so, and they have to stitch that together, so the fundamentals of what, the way you described it I think are accurate on both sides. One, security's broken, it is broken. We've got too many vendors and we're bolting it on, we got to fix that. VMware is in a position, partnered with Carbon Black, to do that I think really well. The second piece is that the cloud does allow us, I'm not sure about rainbows, but the cloud does allow us to change security fundamentally because of some of the characteristics that I described earlier, and if you take Carbon Black plus VMware, plus what VMware is doing to deliver across any cloud, any device, any application, I think we're in a really interesting spot to help customers get more value from their compute stack and from security. >> You know, one of the things that VMware has always done well is they play in multiple environments. Back in the early days of server ritualization, didn't matter what hardware, they would get that across. Their cloud strategy went through quite a few iterations, you know, Sanjay Poonen came on our program and said, you know, "vCloud Air, we failed. "We got it wrong, we did it," but today every cloud show I go to there's a VMware piece of that. They're partnering with AWS, with Azure, with Google, with Alibaba, with Oracle even-- (chuckling) And IBM recently. But still one of the critiques I have for VMware is VMware does good at managing their house, but security, customers, as you said, they've got 75 tools and they're going to have their VMware state, and they're going to have their native cloud pieces, and they're going to have their non-VMware environment. So how can, you know, once you're under VMware, you know, participate in that environment? Will you primarily be VMware environment and the VMware cloud environment, or will it be a broader cloud security strategy? >> Yeah, well I think certainly VMware has done an amazing job over the last few years of really pushing this any-cloud model, right? "Hey, no matter where your workloads "are going to be in a hybrid cloud environment," you know, "we're going to be there to help you," and more effectively, more efficiently, faster, better performance, strong ROI. And so if you look at Carbon Black's roots, and I mentioned this earlier, one of our core beliefs is that one vendor can't do it all. You have to build on an open, extensible API-based platform, and that's what we've done since the beginning of the company, and so you will not see Carbon Black change our philosophy. You know, we will continue to be very, very open, and I think, by the way, that reflects very much VMware's strategy as of late, which is an open strategy where they're playing with lots of providers in the marketplace. Again, the benefit of Carbon Black plus VMware on that platform is that for VMware infrastructure, their products, I think you're going to see out of the box security capabilities that are going to give advantage to customers, from ease of use, from the way that that security works, et cetera, and then we will continue to partner with other vendors out there across the market. >> All right, Patrick, we know, you mentioned how many different tools customers have to deal with. There are more new threats coming out, you know, every day. There's no way that a person or a team can keep up with all of this, so you know, is AI the answer? How are these technologies going to be able to allow our systems to be able to protect us better and update, you know, we haven't talked abut AI yet. I know it does fit in-- >> We have to talk about AI. (chuckling) >> So just to understand how you know, the systems and the software and the solutions are going to help enable teams to be able to keep up with, you know, the rapidly expanding and changing landscape in security. >> Yeah, AI is a tool, we use it, and just as I've mentioned cloud, right, along with the ability to analyze trillions of events on a daily basis, things like AI can play a very significant role in helping me to understand what's happening across very large corpuses of data, and so we use a lot of it, and that allows us to understand when there's an anomaly somewhere across the globe on some system, some endpoint or device, anywhere across the globe and then leverage that to help our other customers. So AI role is playing an important part. It will continue to play an important part. But AI leverages the data that we collect, so if you go back to where Carbon Black is today with all that data that we're analyzing, one of the really interesting things is VMware today has 70 million VMs. 60 million of those are on-prem, 10 million of them are on the cloud. Part of the benefit that Carbon Black gets from VMware is we're going to get all this additional telemetry that we're going to be able to, again, consume, leverage AI capabilities to help with the analysis of that, and again, provide more customer back to the value on seeing and stopping the adversary. That also extends to what VMware's doing on the device side with Workspace ONE, et cetera, so there's a lot of opportunity over the coming quarters and years to provide more value for customers in understanding what's happening across their environment because of all of the touchpoints we're going to have as part of the VMware compute stack. >> All right, Patrick, final thing, what does this mean for your customers? You know, I think back to, you know, not that long ago you did an IPO, you know? What would that mean for the growth, the investment into technology and growing the team. Now, you know, in industry parlance, you know, you had another exit and you will be part of VMware, so we might not get as much visibility into the specific revenues and the hiring that you're doing there, but what will this ultimately mean for Carbon Black's current and potential future customers? >> Yeah, so we have over 5,000 global customers out there today, and first and foremost it's going to mean more investment from a product roadmap standpoint. If you look at 2019, this year, the number one area of investment for Carbon Black was in R&D, and as we move forward, again post-close, our customers are going to see continued investment in the platform, in our cloud security platform, in order to ensure we continue to bring more capabilities to market. And then, as I said earlier, in conjunction with that do everything we can to integrate in with the VMware product portfolio, again, so that security's not bolted on but it's intrinsic to the compute stack, and so I think that's the biggest thing. I have had the opportunity to go out and speak to many customers over the last four weeks. Customer and partner reaction has been outstanding. They get it, they understand it, they understand that there's a better way and that's what we're going to be doing as part of VMware. >> Yeah, any surprising nuggets in the last month talking to the customers and partners more that you've learned? >> This is going to sound self-serving, but it's the truth. I will tell you that the VMware reputation out there is outstanding. I mean, and I had been surprised at how little I have to do to tell them why this makes so much sense. They get it, the majority of our customers get it. They understand the possibilities of what we can provide, and there's a level of excitement out there, again with our customers and partners. It's just, it's awesome. >> All right, Patrick Morley, CEO of Carbon Black. Thank you so much for joining us on theCUBE. >> Stu, thanks. >> All right, lots of coverage, of course, through 2019 and gearing up for 2020 where we'll all have perfect hindsight, I'm sure. Check out thecube.net for the events we've been at, search where we're going to be, and please reach out if you have any questions. I'm Stu Miniman, and as always, thank you for watching theCUBE. (techy music)

>> Narrator: Live from San Francisco celebrating 10 years of high tech coverage it's theCUBE. Covering VMworld 2019 Brought to you by VMware and it's ecosystem partners. >> Welcome back everyone to The Cube's live coverage here in San Francisco, California for VMworld 2019. We are here in the broadcast booth. We have two sets going on all day for three days. The last day of winding down VMworld of our coverage. I'm John Furrier, my co-host Dave Vellante. Stu Miniman is holding down on the other set. But here we are going to analyze what's happened at VMworld 2019. We've assembled the top industry analysts. My co-host Dave Vellante, Peter Burris and David Floyer with Wikibon who have been in the analyst sessions in the hallways, doing briefings, digging getting all the data. Let's analyze it. Guys welcome to theCUBE, welcome back to theCUBE. Good to see you. >> Thank you. >> All right so what's the analysis. VMworld 2019. >> What's the core of it? I believe that the core of it is that they're taking their centralized and data center platform and extending it. Extending it to the edge, extending it to every aspect. Extending it to multiple clouds not just AWS but a whole number of clouds. Extending it right the way down to the edge even with ARM processor capabilities, and extending the interoperability, the hybrid nature of those offerings. And trying to establish themselves as one of the core platforms for distributed hybrid processing. >> Peter what's your take? How should the business model with Pivotal, they got security in there. What's your analysis of VMworld 2019, what's happening? >> The analysis of the show is, it's, I'd say it's interesting. It's not as strong as it could've been. But let's start here, per what David said, look, these guys made a major bet three years ago that a lot of, it was like on a knife's edge, which way is going to go. And it went the right way. And we observed last year that it went the right way not just cause it was a good idea but because Gelsinger built the team that could execute. And what I would say out of David's stuff cause I think you're a little bit, you're getting ahead a little bit on some of the edge stuff and there's still a lot of work that's got to get done but I think what users should walk away from the show with is they made a bet, it turned out to be the right bet and this is a team that can execute. And the promises that they had been making they have been realizing. And that's where I say that it's kind of what's, it's almost a weird thing because in many respects VMware could be screaming from the rooftops at this point in time that they are Switzerland with teeth. They can work with everybody but do so in a way that actually does have manifest impacts on how digital businesses work. And so I think in almost a weird way VMworld 2019 was more subdued than it could have been. The industry is still looking for that thought leader that company that's going to provide that kind of central, that kind of center piece of what's going to happen. And a lot of folks don't want it to be AWS. And it's almost like VMware could have been a little bit more forceful, a little bit stronger in how they talked about the success that they're having. >> So you're saying they're a little bit humble. They could have been louder and prouder about their accomplishments. >> Or you know, sometimes I almost wondered do they really know the tiger that they're riding right now because they're a lot of enterprises out there that are truly starting to bank on these guys and their success is being increasingly tied to VMware's success. >> Peter brings up a great point, I want to get your thoughts on this because you've been digging into the numbers. I think they actually have a great team, they got all these business units they seem to be kind of getting them into formation. It's almost as if they don't want to brag too much because they got more work to do. As you mentioned the edge. >> Peter: Yes a lot of work to do. >> And I think you laid it out perfectly in terms of what they're trying to do. I think Peter you bring the reality to it but they've still got to beaver away on some things. They got work to do. What's your take on this? >> Well, so I want to pick up on something that Peter said, so Pat said the strengths lie in the differences not the similarities. There's a lot of differences between the bets the VMware is making and the bets that Amazon is making. Now, can they both payoff, yeah they probably can but we've noted the differences. Amazon doesn't talk about multicloud. Amazon says cloud security is great. Don't say it's broken, that's a bad narrative. Amazon says that they want to be or they are the platform for developers and the future of the best infrastructure in developers company. That's what VMware wants to be. So I see those two at odds. >> Well aren't they different animals though. Amazon's in the cloud business. >> They are different animals except when it comes to the large enterprises that this year have actually put stakes in the ground about how they're going to move forward with cloud. >> John: What are those stakes? >> Well, first off they're saying, where the data goes, that's where the service needs to go. They're starting to acknowledge that the relationship between data and IP is very real. They have fully acknowledged it's going to be hybrid cloud or it's going to be multicloud and that SAAS applications are going to be still, as bet with our analysis, is going to be the dominant feature of that. And I don't mean to cut you off Dave. >> Dave: No it's all right. >> But that's where the enterprise is going. The enterprise doesn't want to spend a lot of time talking about S3 and object stored. They want to talk about how the services are going to get to the data where they want the services to be. >> John: Good point. >> I think there's one other point that we should add to that what VM's capability is, is that you don't have to migrate the applications. VMware owns those applications and the cost of migration is huge. >> Peter: If the application's in VMware. >> If the applications in VMware. So they're offering ... >> John: Which many are. >> Peter: Many are. >> Many are yes. So they're offering a lower cost way of getting to the cloud if they can execute on the capabilities of putting containers into their platform and to make it a microservices platform. So if they deliver that and maintain that continuity with their existing base that is a powerful place to come from. >> Although David, I think you'd agree with this that even in the cloud today things like microservices are not really the as is position. It's definitely ahead and it's moving forward but so VMWare can show, we can get you to that cloud experience. We may lag a little bit when it comes to containers but it's going to be a few years before containers are the default way of doing things. >> Guys Pat Gelsinger, I want to get your reaction to this cause this is, you have to add some color to this because he left it just hanging out there. His last comment was, looking forward 10 years, and look back for 10 years of theCUBE coverage, he said networking, security and Kubernetes are the three waves that you need to be on. >> Networking, security, and Kubernetes. Not networking security. >> John: No, networking as a ... Networking needs to solved, security and Kubernetes. Three waves, you got to be on those waves. What does he mean by that? What do you think he means by that? Networking in terms of on premise networking. >> Well I think that, I'll start David. But I think the first thing to note is that, and Dave and I have talked about this a lot in some of the segments we've done. The cloud was miscast as a centralization trend. What the cloud really is, is a framework for how you think about distributing data, and distributing the work that's going performed against that data closer to where it's actually required and where it's actually created and consumed. And that's really how we should be thinking about the cloud, is it's a way of distributing work and distributing data to where it needs to be. That means networking is essential because, and we're starting to hear this from large users, in many respects they're wondering how their networking strategy and their cloud strategy are going to fold in and be the same strategy. On the security front, yeah you got to have end to end but how do you put a perimeter around a cloud. That's not clear. And we're thinking about going towards data security you know, data security and zero trust security but perimeter still, stuff is still very important. There's some very new technologies and interesting technologies that are trying to bring some of that perimeter stuff to that notion. Networking, security, and the last one was Kubernetes. The thing that's interesting and I could see why Pat would say that because it's very true for VMware. >> They're betting on Kubernetes. Is that another knife edge bet? >> Well no it really isn't. See, it is, maybe you could say it is but look, a virtual machine virtualizes hardware. A container platform virtualizes the operating system. And so is it possible the containers are going to end up virtualizing VMware and what does that mean for VMware? So VMware has to reach up and be a phenomenal place for containers, otherwise the value propositions going to move up and beyond them. >> And the Kubernetes has been picked because that is an open source. It means it has the potential of being a standard across multiple clouds, and offers that ability to automate and orchestrate across in a way that no other set of software can do. It's a long way to go. He's putting a bet on it and I think it's the correct bet to do there. But it's a long way to go before you will see if that's the right bet. >> What about networking and security honestly, IoT's in there. Peter mentions these use cases that requires data. The original Cloud 1.0 definition was, I'm building it out, I'm a startup. I'm going to just build my app in the cloud and I'm not delivering, the data's in the cloud. >> Peter: And all my users are going to connect to the cloud. >> Now Cloud 2.0 is really going down what you're saying so networking becomes fundamental. >> Networking becomes fundamental not just to move data around but to move code to data as well. >> Well to your point the cloud is this massively scalable distributed system. >> That's right. It is the massively distributed, scalable distributed system and the other thing that I'd say about Kubernetes, networking and security is Kubernetes is a cluster, a way of describing or thinking about application from a clustering standpoint which is inherently networking. And so Kubernetes in many respects is describing how application networking's going to look in a few years. But the other thing that's interesting about it, is because it's virtualizing that operating system, challenges associated with distribution of code, of versions, of all that other stuff about how you handle software life cycle, with Kubernetes, it's going to be that much more cloud like in the future. And I think as we go forward it would be interesting to imagine a security model that is built on top of Kubernetes that allows you to literally take elements of containers and vary those containers in just like every 36 hours so no part of your code base is older than 36 hours. Think about how much more secure that would be than what we have today. >> I'm a big fan of Kubernetes. I think it's a great bet. I don't think it's a knife edge. I think it's pretty obvious and it's either go one way or the other. The cloud guys are either going to fork it and slow it down >> They'll fork it and slow it down but it's still going to go. >> That's job number one. Job's not done so Kubernetes doesn't run. >> Let's put it this way, John, that in 10 years 80% of software is not going to be based in Kubernetes. >> John: Guys switch topics here. >> Dave: I think that's a safe bet. >> Yeah. >> Let's switch topics. I want to get analysis on VMware as a software company. Pat mentioned Nicira, which was SDN which became software-defined data center. Obviously big moves with 5G which I think is more of a telegraph of the future. Service provider narrative. Kind of sounds like going after Cisco to me. So Cisco's value proposition, again to your point about directionally correct, VMware makes these statements. Their most product direction with a demo, they show a little directions, some clarity and then they got to fill in the blanks. That's been their move. Cisco's up and running, they have a network of devices. They have UCS, ACI. Is there a collision course with VMware and Cisco? >> Pat said on theCUBE, we've got a multi billion dollar networking business. He said in the past that Cisco's a great hardware company. We want to do to networking and storage what we did to compute. I think it's no question. And then the data from ETR, the Enterprise Technology Research guys, the guys that do the panel, show that very clearly NSX is slowly negatively impacting Cisco hardware sales. So, yes, there's absolutely no question in my mind. Having said that, when you talk to customers, and I've talked to several this week and I've asked them that question. How is NSX affecting your Cisco spend. These are Cisco customers, and they say, oh we're sticking with Cisco. We're going with ACI. because that's the majority of Cisco customers to your point David, aren't going to just migrate off and throw away their Cisco gear. It's not going to happen. >> It's the same thing. They've invested a huge amount of money in doing that. It works and as long as Cisco ... >> Who's they, Cisco? >> No the customers have invested that huge amount of money in all of that infrastructure all of that way it works and they will, as long as Cisco continues to invest and continues to invest in software as well for that platform. >> If you're advising the CEO of Cisco what would your advice be to him? Get your thinking cap on, you're coming next. Hold on I want David to go. >> He's dying to jump in. >> The core that Cisco has to manage is finding solutions to multicloud and hybrid cloud issues. There has to be an end to end. They have to provide more of the data planes, more of the control planes, and more software to enable this connectivity across these different clouds. >> Can Cisco move up the stack as fast as VMware because one's a software company one is a hardware company but it's software now. >> That is the challenge that Cisco has is putting in place the people the resources and the techniques to actually drive that. >> Your thoughts, your advising the CEO. >> So before I advise the CEO I'm going to make one quick observation about the collision course. I was trying to think about this Dave. I can't think of, just off the top of my head, I can't think of a single hardware company that was driven out of business by VMware when they virtualized systems. Maybe there were some, maybe there were some that would say, oh I'm gone because of VMware. I think it made it more productive, it probably took some of the capacity out. But at the end of the day the stuff doesn't run on hamsters right. It's an interesting question. >> Sun? >> I don't think it was VMware. >> Not directly but it certainly gave a lot of tail wind to X86 [John] Linux and Intel killed Sun. >> Right, gave a big tail wind to X86. That was a different set of trends, right. It was related, your right. >> Dave: Definitely related. >> But the point it, I'm not sure that NSX is going to drive networking companies or network hardware companies out of business. >> No I didn't say they'd drive them out of business but would you not agree that VMware made the server business a lot less interesting? >> It changed the value, it changed the degree to which the hardware itself was regarded as the asset around which the IT Organization had to create it's value proposition, it's organization it's worth closing center. VMware became much more strategic than ... >> No question about it. >> Than HP, Lenovo. And Dell servers. >> We should talk about this more. >> Right now you're advising the CEO. >> So here's my advice to the CEO of Cisco. Your networking guys are killing innovation in your company. Right now the networking guys have an absolute stranglehold on how Cisco behaves, where Cisco does. We've all encountered these really great ideas bubbling up out of Cisco and they emerge and they're there for about six weeks or eight weeks or six months and then they suddenly disappear and you go and you do the forensics on the crime that was committed and it turns out that the networking hardware guys ended up rising up and affectively launching the antibodies on every new innovation virus. >> You mean internally in Cisco? >> Dave: That's a really interesting point. >> They have a Clayton Christensen innovators dilemma problem that they got to fix. >> And Chuck Robbins I think understands this and this is why he's putting so much emphasis on DevNet. Because he see's that the DevNet opportunity to create infrastructure that's programmable is a way potentially out of that innovation lock. >> If I was advising the CEO of Cisco I would kind of take the same cultural thing. I think you're right on the money on the culture. Gelsinger has a team, you point that out that's really good insight. My advice is simple. Double down on DevNet. Turn the networking guys, by the way, who have the keys to the kingdom in every single enterprise so they're running and operating enterprise networks and data centers. The network guys are the most powerful people in the companies in IT. Turn them into active coders. That's what DevNet is doing. That is totally the right move. Change the culture within your customer base, If that's not going to work internally then you know. >> But the whole of the cloud thing has brought together storage, networking and compute as a single object, a single distributed object. And one of the things that VMware has done with NSX is reflect what AWS and ITO were doing beforehand which is lowering the cost of storage very, very significantly, and putting the functionality into software as opposed to hardware. >> If I was Cisco, I would be looking hard at doing something big with Google. Because Amazon is VMware's preferred partner. I would figure out a way to get belly up to Google and figure out something bigger. It's not going to happen with Microsoft. They don't really need Cisco. Google needs someone like Cisco. >> I'm sorry from a customer engagement standpoint? >> From a customer engagement standpoint and to help Cisco's cloud relevance. Cause right now even in the multicloud world, no one even knows. What you just said David, that's exactly what Cisco's doing and nobody even knows about it. >> That's right. >> Well they could be the backbone of the Cloud 2.0. Go back in history, coaxial cables had many computers attached to them. Then you had Cat 5, Cat 3 wiring, you had hubs. Then you had subnetworks, you had internetworking. Campus building. That became the network. Cisco is the same kind of option for cloud to be the on ramp. That's what VMware wants to do. Dell wants to be the on ramp, VMware wants to be on ramp. Cisco's running the networks ... >> And another piece for Cisco, and you've said this before Peter, is security. You talk about VMware being the cloud security company, if I were Cisco those would be fighting words. Cisco is in a strong position from it networking base to be a leader in security. >> And I think you got a good point Dave. The thing I'd say John, and you guys have all heard me say this, but I'll say it again. What killed mini computers was not just the microprocessor. It was that DEC had DECnet and DG had digital whatever it was. And along came Ethernet and along came IP and along came Cisco and it flattened all those networks. Networks want to be flat. And AWS, if you start to talk about Kubernetes, all these little proprietary tweaks to Kubernetes which fundamentally is how you think about doing a programmable network, physics and everything else, technology is going to want to flatten that stuff as much as possible. And Cisco should be participating in that and they're not because their networking guys are saying, no, no, no, nobody gets into our sales organization except us networking hardware guys. And that's a problem. >> They got to go back. When VMware went back to their roots that made them stronger. Cisco's got to go back to their networks thinking it differently, I agree with you. They could be the backbone for multicloud. That's their opportunity. >> But it's got to be a flat network to do that. They've got this entrenched North, South mentality even though they see the trends. >> Okay, final summary guys, let's wrap this up. Let's go around the horn, start with Peter. Take-away's from 2019 VMworld, our 10th year theCUBE coverage. What's your thoughts? >> The machinations, two I'd say. The organizational machinations inside Dell Technologies have got a long ways to go. There's a lot more coming as Michael figures out he wants to institutionalize all this thing. But he's got two great executives. Pat Gelsinger has turned into a pretty darn good CEO. So I'd say that VMware is seeing the market good, they've got a great team, they're executing really well. They're at least putting bets where they need to but here's, I think the biggest weakness, and this came up in one of the session in the analyst thing, we all know how VMware expects things to come to VMware and how VMware is going to be effectively the manager of record, the cloud of record for all clouds. Okay good. But it's not going to be. The reality is VMware is going to emerge as an extremely important on premise and cloud technology if that's what you want to do, that allows companies to have those options about where they put stuff. But how is VMware going to express itself to other clouds? From a management standpoint, from a control plane standpoint, from a data standpoint. That's not clear, and big enterprises are going to start pushing them pretty soon to say, okay great, but we're not just going to do you. How are you going to be managed by the stuff that we want? How are you going to be a resource where we want our management points to be. >> John: Dictate terms. >> Right. >> The customers going to dictate terms. That's a great point. David Floyer you're up. >> All right, so the biggest challenge for VMware is that is making themselves successful in the public cloud. AWS owns that business. They are very, very cost effective. They are driving very, very hard, and the clash is going to be when AWS goes into the distributed side and comes into full contact with Dell and VMware in that space. So the race is on between the efficiency that they can create for this network and the efficiency that AWS can create by getting better and better at distributed computing. They will go into multicloud, they will go into. >> John: Dave your thoughts. >> I've talked a lot this week about multicloud and what I think is real and what's BS. I've talked about VMware's acquisitions. I want to change it up a little bit. When you come to these events, the big picture of how we're changing the world and we're changing society, tech for good, all that stuff, I just want to make a point for historical context. I think it's indisputable that the first 50 years of last century from the early 1900s to 1950s were far more remarkable than the last 50 years of IT. And I think sometimes we sit out here in Silicon Valley and smoke our own, you know, whatever, >> It's legal here actually. >> And how we're changing the world. And I'm not saying we're not changing the world but Pat Gelsinger said there's never been a more important time to be a technologist. Well he may be right, and I'm not saying this to disparage the statement but I'm just, again trying to provide some historical context. You're up against telephones, planes, automobiles, the electrical grid itself. So I leave you with this question, what's more impactful from a society standpoint, and from an economics standpoint, the move from automobiles to autonomous vehicles or the move from horses to cars? And I think that as an industry we have a long way to go in terms of being the most important time to be a technologist. >> I think I agree with Gelsinger. It's the most important time to be a technologist now cause more than change is required. I think if you look at the data, I think this shows all about Cloud 2.0. I think some of the things that Peter, Dave you pointed out points right to it. Customers are dictating terms and the infrastructure's evolving and the enablement of what that system looks like is going to spin in favor of the customer. And they're going to start making those changes because to change society, it's not going to come from the vendors. That's just philanthropy. It's going to come from people building applications. I think the Cloud 2.0 equation has to fill out. >> I think you're right. If in fact this is going to be the most important time for technologists, it absolutely has to come from the buyers of technology and the people applying technology not the vendor community. No doubt. >> It's a great question though Dave. Great question. >> We're going to take that question to our power panels in the studio, Palo Alto and Boston. Of course theCUBE studios. Check it out. We are here wrapping up VMworld 2019. Want to do a shout out to VMware for allowing us to be part of their ecosystem for 10 years. It's been a great run from 2010 when we had cameras that we turned and we thought they'd work, they did. The system got better every year and that's to the generous support of our ecosystem partners who sponsored theCUBE so we can create content editorially and co-create with the sponsors for the betterment of the audiences. And thanks to that we get better equipment every year. And shout out to the great team we have here. Amazing execution. Two full sets. And thanks to my co-hosts and the teams. Stu's not here, he's on the other set. Jeff Frick who's running it all. What a great team. I want to thank VMware and the entire community for 10 years. That's a sign off for theCUBE. 10 at Vmworld 2019. Thanks for watching. (upbeat music)

>> Announcer: Live, from San Francisco, celebrating 10 years of high-tech coverage, it's theCUBE. Covering VMworld 2019. Bought to you by VMware and its ecosystem partners. >> Welcome back to theCUBE's live coverage here at Vmworld 2019, San Francisco, California. We're in Moscone North Lobby. I'm John Furrier, with my co-host Dave Vellante. Dave, 10 years of covering VMworld. This is our 10th year. Pat, you've been on every year since 2010. We have photos. >> That's sort of scary. >> You had a goatee back then. (Pat laughs) We've heard your rap going way back. Welcome back, good to see you. >> Oh man, scary. You guys probably got some dirt on me. Boy, I better be careful. >> John: Pat Gelsinger, the CEO of VMware on theCUBE. Thanks for coming on this evening. >> Oh, always a pleasure to be on with you guys, love it. >> Don't end up as driftwood. Security is a do over. We're going to talk about all that. >> We're going to spend the entire segment just talking about Pat Gelsinger's predictions. We'll recycle some of them, but let's get into the core news here, VMworld. You've done such an amazing job. We've given you a lot of props on theCUBE over the years, but still continuing, even in the market climate that's swinging up and down right now, VMware still producing great results. The team is executing. Their transition since October 2016 when you kind of made that move, cloud is it, clear vision, a lot's been falling into place. Pivotal has dropped on your lap, and you got the engineering stuff coming out on top of vSphere and a bunch of other things. Great stuff, I mean, you must be geeking out. >> Well, thank you. At the US gymnastics finals, Simone Biles did a triple double. First time ever in competition. And I think of our last week as a triple double, right, two major acquisitions, an earnings call, and now VMworld and all the announcements as part of it. It's like wow. >> John: You stick the landing, you stick the landing. >> That's right, we did yesterday morning. We stuck the landing and Ray did that today as well. So super proud of the team in bringing these across the line. And I think certainly meeting with many of the customers and the partners here everybody's sort of going wow. And I was excited about VMware before I got here. Now I'm just euphoric, and it's really-- >> I'm told Ray did an exceptional job. I'm going to talk to him later today on theCUBE. Today in his keynote he was great. He repeated the messages over and over again, but he nailed the tech piece. I got to ask you, as the engine of VMware is continuing to be put together and expand it's like a new turbo engine gets pulled in here. There's a lot of really good engineering going on. What are you most excited about? How would you describe all the action going on? If someone says, "Pat, what's the underlying engine here?" What's being built? What's going to be the outcome of all this? >> Well, I think it sort of boils down to, right, these two phrases that you heard from me yesterday. We're going to engineer for good, the tech for good stuff, we're going to do good engineering. And doing both of those is just okay. And you sort of say, "Hmm, we got vSAN," right? We're not being able to optimize the performance because big blocks, little blocks, latency, buffer size, all this other kind of stuff, so now we're doing Magna, right? And when you see that demonstration there, it's like we're going to do it automatically for you to be a fine-grain optimizing your storage. Wow, that's pretty cool, and it's intelligence, right? It's sort of saying, "Wow, this is really cool." So let's go automatically produce an understanding of the underlying network, understand what's going on, give you the rules that we recommend, and allow you to simulate them, which is super cool, right? Within minutes, we will give the network engineer more understanding of what's really going on in our applications, and then allow them to see it in real time and then apply it. Every one of these, and it's just 10 or 15 tremendous engineers who are doing these little innovations that are fundamentally changing the industries that they're in, in addition to the big stuff. It's just thrilling. >> Dave did a survey before coming into VMworld with customers with a panel. 41% said they're not going to change their spending habits with VMware so creating the-- >> Dave: They said they're going to increase-- >> Increase. >> In the second half, only 7% said they're going to decrease. >> So great customer loyalty, and remember, VMware's moving so fast and transit. Customers aren't moving as fast as you guys are, and you've talked about that before. What are you hearing from customers as they look at it and say, "Wow, is it too much new stuff?" 'Cause they want to continue to operate, but they also want to enable the developer piece. Because remember, DevOps means dev and ops. You guys got the ops piece down. You're adding stuff to it. There's always concerns there making sure it's smooth and you guys work on that. The dev piece becomes super critical. That's where Amazon really shined with public cloud. So hybrid cloud's here. What is the DevOps equation for hybrid? I mean Kubernetes is a good start. Where do you see it going? >> Yeah, and that's really the center. To me, that is the most important news of VMworld this year is the entire Tanzu message, the coming together of Pivotal, the coming together of Pacific, coming together with Mission Control, so really leveraging VMware in the run layer, leveraging Pivotal in the build, and Heptio in the manage, right, and those coming together into Tanzu. I think that's the most important thing that we're doing. And I think for operators, which is really the center of our audience here at VMworld, they've always struggled with those crazy developers. They do this cool new stuff. It's not operational, it's not secure. But in bringing those together, the magic formula for that is Kubernetes. And that's why we're making these big bets. The move with Pivotal, obviously the Heptio guys, I mean Joe Beda and Craig, they're just the rock stars of that community because they really are solving in an industry-consensual standard way. That's really the magic of Kubernetes. This ain't a VMware thing, this is an industry thing. >> Is Kubernetes the technology enabler? I mean, TCP/IP was that in the old networking days. It enabled a lot of shifts in the industry. You were part of that wave. Is Kubernetes that disruptive enabler? >> Yeah, I really see it as one of those key transition points in the industry. And as I sort of joked, if my name was Scott, and we were 20 years ago, I'd be banging the table calling it Java. And Java defined enterprise software development for two decades. By the way, Scott's my neighbor. He's down the hill, so I look down on Mr. McNealy. I always sort of like that. (everybody laughs) >> He looks up to you. >> But it changed how people did enterprise software development for the last two decades. And Kubernetes has that same kind of transformative effect, but maybe even more important, it's not just development but also operations. And I think that's what we're uniquely bringing together with Project Pacific, really being able to bridge those two worlds together. And if we deliver on this, I think the next decade or two will be the center of innovation for us, how we bridge those two roles together and really give developers what they need and make it operator friendly out of the box, cross the history to the future. This is pretty powerful. >> So that does lead to the big question. You just mentioned developers. And when you look out the VMworld audience, it's not comprised of huge developers. I know you're thinking about this, so what's your plan to attract those developers? You're giving them platform now, and the technologies. but those builders, what are you going to do for them? Is it build community, more events, more training? What's the plan there? >> Yeah, and I'd say I think about it in a couple of different context. One is if we were here six years ago, and you would have asked me about open source, right? I mean, VMware's reputation in the open source community wasn't good, right? We hired Dirk, we started to build momentum, make contributions. One of the litmus tests for Joe and Craig on Heptio, 'cause remember, a lot of people could have bought Heptio. Because some was who's going to be the buyer, but also will they be a willing seller. And their litmus test was are you really serious about open source, right? Are you really committed to the open source, Kubernetes tree and development and cloud-native computing foundation? Are you really there? 'Cause they were also looking do I want to be bought by you? Do I want to be part of the VMware family? And we passed the test. That's why Heptio's part of the team. Clearly, this has been central to Pivotal and their views. So we have to be open-source credible. We also have to be developer credible, and those two are tightly linked. And that's why we noted on stage Pivotal, particularly the Java community, is three-plus million developers. Bitnami is two million-ish developers. We now have high volume connections to the developer community, and you're going to see us show up in dramatically more profound ways at places like Kubicon and SpringOne is coming up, just start to be in the developer spaces. And ultimately, you got to do stuff that they care about. At the end of the day, winning developers has nothing to do with great marketing, even though that's important. You have to do great code, right, and bring them value to their development assignments. And we think with the assets that we're lining up, that's why we did Pivotal, Bitnami, Heptio, some of our organic things, Dirk's leadership here. I believe that a year or two from now VMware could be seen as the most developer and open source enterprise company in the industry. And that's the goal that I'm on. >> Well, I have an idea for you. Allocate 1,000 engineers to open source and start having them build new applications, new workloads, give it away to the open source community, and then sell your products and services to them. That would get you in fast. >> Well, by the way, we now have hundreds of engineers who are committed to open source, who their full-time job is open source contributions. So I'm not to 1,000 yet, but I'm now several hundred that their day job, night job, weekend job is open source contribution. So we're becoming very credible, and as you heard me say in the keynote, we are now top three contributor to Kubernetes. This is big, and some areas like the networking area we're clearly the leader in a number of the key networking open source technologies, and you'll see us do more of those kind of projects. >> One of the things you mentioned, I mean you mentioned about open source six years ago, you might have rolled your eyes, or you might not have had an opinion on it 'cause the timing of where VMware was. But one thing you've been banging the drum on since 2012 is hybrid cloud. And so you see certain things early. You see those waves. That's what you're known for, in my opinion. You're really good about it. You see blockchain as a great wave, but as a headline I'm reading on Fortune it says, "VMware CEO Pat Gelsinger, "Bitcoin is bad for humanity." >> Sold all my bitcoin (laughs). >> Okay, so now are you implying then, and blockchain is a lot of open source components there. It's evolving, you've a lot of blockchain projects. So is that an indictment on the unregulated currency market or is it the underlying infrastructure? And are you excited about blockchain as an underlying? Is it one of those hybrid cloud moments for you, or is it more of we'll see how it develops? What's your thoughts? And explain the bitcoin comment too. >> Yeah, the idea of distributed ledger technology, immutable distributed trust, I've said I think of that and blockchain as the underlying technology as almost like public private key encryption, right? If we go back 40 years before RSA or Vashumi and Ari, it's that important. This is breakthrough, innovative technology in how you do distributed secure trust. That's powerful, so we are huge believers, strongly committed to blockchain and distributed leverager technology. Now, why do I make my comments like I do on bitcoin? So bitcoin, as it's implemented, and implementation of blockchain and distributed ledger, I assert is bad. It's bad for two reasons. One is it's an environmental crisis, right? A single ledger, if you and I transacted a penny, right, I would consume enough energy to power your house for half a day. I mean, it's incredible, and I mean, that's why you have these crazy bitfarms being built and people finding GPUs. >> So you think from a sustainability standpoint. >> Absolutely. >> That's where you came from. >> Climate sustainability, right, this is a terrible implementation of blockchain. Secondly, the way it's also done as well in this totally unregulated environment, almost all of its uses are for illicit and criminal purposes. That's who's trading in bitcoin as well. So its purpose is almost all illicit, right, and it's environmental crisis. I say bad. Now, I'm not saying that blockchain is bad. I think this is revolutionizing. >> I want to make sure we clarify that because obviously unregulated outside the United States has been a big problem. We see it in the SEC crackdown, and results are-- >> Studies have shown over 95% of the use of bitcoin is criminal, so say bad. Let's go make it good, and that's what I mean these two phrases, do good engineering, and engineer for good. How do we make blockchain, and this is part of the reason, we had just announced on Sunday a partnership with Australian Stock Exchange and Data Asset, that they're leveraging the VMware distributed ledger technology, right, as part of their go-forward strategy for the stock exchange of Australia. Well, that's good, right? We're making it suitable for enterprises, meeting the regulatory requirements and-- >> John: Are you happy with the progress of where the blockchain is for you guys? >> Absolutely, and we're order-plus magnitude better in terms of performance and energy consumption. So yeah, and we're just getting started. >> And it's consensus-based, which is great. A quick question for you on multicloud. So hybrid cloud you said in 2012, I challenged you on it, and you've been banging the drum since 2012. It's a couple years into it, and hybrid cloud is pretty much standard. People see it, recognize it as the cloud 2.0. Multicloud is all the buzz and all the rage. I hear it everywhere. What does it actually mean is a different debate, so I want to get your thoughts on defining what multicloud is and is it going to have that same gestation period of the same kind of years? 'Cause if it's seven years to get or six years to get hybrid cloud mainstream, is multicloud going to have a similar trajectory? >> Yeah, so let's try to be very crisp with the definition. Multicloud is simply that. Customers using multiple clouds for different business purposes. And what we said is is that we're going to help them manage. That's the center point of cloud health, right? Help customers manage, cost optimize, secure in a multicloud environment where the underlying infrastructure is dissimilar, not compatible, right? And in that sense, you sort of say you can have consistent operations if we do our job well with cloud health, but you're not going to have consistent infrastructure, meaning I can't VMotion between these things, I can't have higher these things. So that's the multicloud. Now a proper subset of multicloud is hybrid cloud. And hybrid cloud is where you have both consistent operations and consistent infrastructure. And that's when we can do things like you saw on the demo today, right? We're running a VMware stack on Azure. We're moving Azure running workloads in real time, right, without stunning them, pausing them, to an Amazon VMC instead of moving workloads from Amazon VMC onto an Azure instance. That's the hybrid cloud, and that's the power at work, from private data centers to multiple different targets in the public cloud where you can be optimizing the location of work nodes based on the proper business requirements. And that might be governance. That might be performance. It might be latency. It might be the time of the day of the week when you have capacity available, right? And that's really what we're saying. Consistent operations and consistent infrastructure, proper subset of multicloud. >> I have a question on something you said yesterday. You said, "Strength lies in differences not similarities." True, I buy that. There's a number of difference between you and your preferred public cloud partner. AWS doesn't use the term multicloud. They say you shouldn't say security's not broken. And there are a number. You want to be the best infrastructure and developer software company. They want to be that platform. They want to be the security cloud, on and on and on. So I see this impending collision course, maybe not tomorrow, but what are your thoughts on the differences and the good or bad that does for the industry? >> Yeah, well, we appreciate Amazon, the investments that we're making. We've both bet big with each other, and they've been a great partner. And in fact, I'm going to talk to Andy before the end of the week, update some of the announcements and some of the things. Great partner, we have regular cadence of our activities with each other. And as we said, they're our preferred public cloud partner. And with it, it's preferred in two senses. It's a go to market and how we position that, but it's also an R&D statement, right? This is where we're doing a lot of core engineering, and that will flow into private cloud embodiments, flow into our other public cloud and our cloud-verified partners. But that's the point of the arrow in terms of the innovations, the go to market, and the R&D aspects of the partnership. And I expect we're going to be here five years from now and we're going to have this conversation, and I'm going to answer it exactly the same way. >> That'll be our CUBE's 15th anniversary, and so we'll be excited for that. It's our 10 year, so I want to last question put you on the spot, looking back over 10 years, pick the moments that you think were key inflection points. What were key notable good things that happened, bad things that happened, or things that didn't happen, right? And then going forward 10 years, you laid out a few of them with Kubernetes. Just past 10 years, could be CUBE memories, but in VMware's world, you were at EMC first, then became CEO, a lot's changed. Paul Maritz laid out the original vision. And where we are today, what's your key moments? >> Yeah, well, I think if you go all the way back, obviously, hey when the first WSX, right, people could run Linux and Windows on their client. Wow, right? The first VMotion, right, oh my gosh, and that sort of ushered in ESX. Obviously the transition from Diane to Paul, the public offering, boy, that was a pretty tumultuous time. And from Paul to Pat was very much we lay it out pretty much this any cloud vision, and that model, it was formative and we're sort of bringing it together. It was get rid of some assets, bring together, so sort of that transition was challenging for the company. But then we've started to sort of systematically say build from the core. What do we have? What do we need as we started to build these layers in the concentric circles? The Nicira acquisition, boom, that was the shot that changed the world of networking. And obviously, that doesn't change quickly, but we have a multibillion dollar networking business, Avi Networks, VeloCloud, we're building that set of assets. >> Software-defined data centers. The Core engine, that was a key point. >> Dave: That was a total game changer. >> You cannot build a software-defined data center if you don't address the networking. It's just that simple, and that's why I was so passionate about that. Obviously, the HCI move with vSAN. Joe Tucci was so pissed off at me, right? (everybody laugh) What are you doing? It's operative. It's part of the ingredients of the data center, Joe. I got to do it, wait. >> John: Just being a software company. >> Yeah, yeah, right, so that was a pretty tense moment. The period of the Dell EMC merger, a tough period, right, as well, and just where the company's going to go. And within a week, right, I'm going to be fired. I'm going to be spun out, right? I'm going to be the new CEO of Dell, right? I mean, it was going to be HP. >> John: All the rumor. >> Stock is 40, obviously the Amazon moment, when we did that partnership. vCloud Air, hey, we had the right idea. We didn't implement it properly, and then we did it right with the Amazon partnership, and that just changed the cloud industry. And I think we're going to look at today, this week, and the moves with Heptio, Kubernetes, Pivotal, those pieces coming together, and to this audience Project Pacific, right, it's just like okay, wow, everyone of them will become Kubernetes enabled. 20,000 selfies with Joe Beda, right, have now been ushered because it is that game changing, we believe. This is the biggest free architecture of the Core platform in a decade, so. >> My favorite quote from you was if you're not out on that next wave, you're driftwood. You said that on the QA, I forget which year it was. >> And mine's security's the do over. (Pat laughs) >> You're doing it over, you're doing it, Mr. Gelsinger. >> Next 10 years, what's the big wave everyone should be on? What's the wave that you identify? You've seen many waves, you've created waves, you've been part of waves. What's the wave for the next 10 years that people should pay attention to, that they need to be on? >> Well, if they're not on the networking wave, get on it, right? They got to be on this multicloud hybrid wave. Could it be louder? The Kubernetes one is the one, right? That's the one I'm going to put at the front of the list. And this move in security, I am just passionate about this, and as I've said to my team, if this is the last thing I do in my career is I want to change security. We just not are satisfying our customers. They shouldn't put more stuff on our platforms if they can't-- >> John: National defense issues, huge problems. >> It was just terrible. And I said if it kills me, right, I'm going to get this done. And they says, "It might kill you, Pat." >> Mount Kilimanjaro right there. Pat, thank you for all your commentary, and great look back 10 years. You've been one of our favorite guests coming on theCUBE, bringing A game, you're bringing the tech chops, the historian aspect, also you're running one of the most valuable open source companies in the cloud. (Pat and John laugh) >> Love you guys, thanks so much. >> Thanks, Pat. Pat Gelsinger here inside theCUBE. Our 10th year, VM's looking good off the tee right now, middle of the fairway, as they say, for the next 10 years. I'm John Furrier, Dave Vallante, thanks for watching. (upbeat music)

>> From the Silicon Angle Media office in Boston Massachusetts, it's theCUBE. Now here's your host, Dave Vellante. (upbeat music) >> Hello everybody, this is Dave Vallante with Stu Miniman and we're going to take a look back at ten years of theCUBE at VMworld and look forward to see what's coming next. So, as I say, this is theCUBE's 10th year at VMworld, that's VMworld, of course 2019. And Stu, if you think about the VMware of 2010, when we first started, it's a dramatically different VMware today. Let's look back at 2010. Paul Maritz was running VMware, he set forth the vision of the software mainframe last decade, well, what does that mean, software mainframe? Highly integrated hardware and software that can run any workload, any application. That is the gauntlet that Tucci and Maritz laid down. A lot of people were skeptical. Fast forward 10 years, they've actually achieved that, I mean, essentially, it is the standard operating system, if you will, in the data center, but there's a lot more to the story. But you remember, at the time, Stu, it was a very complex environment. When something went wrong, you needed guys with lab coats to come in a figure out, you know, what was going on, the I/O blender problem, storage was a real bottleneck. So let's talk about that. >> Yeah, Dave, so much. First of all, hard to believe, 10 years, you know, think back to 2010, it was my first time being at VMworld, even though I started working with VMware back in 2002 when it was like, you know, 100, 150 person company. Remember when vMotion first launched. But that first show that we went to, Dave, was in San Francisco, and most people didn't know theCUBE, heck, we were still figuring out exactly what theCUBE will be, and we brought in a bunch of our friends that were doing the CloudCamps in Silicon Valley, and we were talking about cloud. And there was this gap that we saw between, as you said, the challenges we were solving with VMware, which was fixing infrastructure, storage and networking had been broken, and how were we going to make sure that that worked in a virtual environment even better? But there were the early thought leaders that were talking about that future of cloud computing, which, today in 2019, looks like we had a good prediction. And, of course, where VMware is today, we're talking all about cloud. So, so many different eras and pieces and research that we did, you know, hundreds and hundreds of interviews that we've done at that show, it's definitely been one of our flagship shows and one of our favorite for guests and ecosystems and so much that we got to dig into at that event. >> So Tod Nielsen, who was the President and probably COO at the time, talked about the ecosystem. For every dollar spent on a VMware license, $15 was spent on the ecosystem. VMware was a very, even though they were owned by EMC, they were very, sort of, neutral to the ecosystem. You had what we called the storage cartel. It was certainly EMC, you know, but NetApp was right there, IBM, HP, you know, Dell had purchased EqualLogic, HDS was kind of there as well. These companies were the first to get the APIs, you remember, the VASA VAAI. So, we pushed VMware at the time, saying, "Look, you guys got a storage problem." And they said, "Well, we don't have a lot of resources, "we're going to let the ecosystem solve the problem, "here's an API, you guys figure it out." Which they largely did, but it took a long time. The other big thing you had in that 2010 timeframe was storage consolidation. You had the bidding war between Dell and HP, which, ultimately, HP, under Donatelli's leadership, won that bidding war and acquired 3PAR >> Bought 3PAR >> for 2.4, 2.5 billion, it forced Dell to buy Compellent. Subsequently, Isilon was acquired, Data Domain was acquired by EMC. So you had this consolidation of the early 2000s storage startups and then, still, storage was a major problem back then. But the big sea change was, two things happened in 2012. Pat Gelsinger took over as CEO, and VMware acquired Nicira, beat Cisco to the punch. Why did that change everything? >> Yeah, Dave, we talked a lot about storage, and how, you know, the ecosystem was changing this. Nicira, we knew it was a big deal. When I, you know, I talked to my friends that were deep in networking and I talked with Nicira and was majorly impressed with what they were doing. But this heterogeneous, and what now is the multi-cloud environment, networking needs to play a critical role. You see, you know, Cisco has clearly targeted that environment and Nicira had some really smart people and some really fundamental technology underneath that would allow networking to go just beyond the virtual machine where it was before, the vSwitch. So, you know, that expansion, and actually, it took a little while for, you know, the Nicira acquisition to run into NSX and that product to gain maturity, and to gain adoption, but as Pat Gelsinger has said more recently, it is one of the key drivers for VMware, getting them beyond just the hypervisor itself. So, so much is happening, I mean, Dave, I look at the swings as, you know, you said, VMware didn't have enough resources, they were going to let the ecosystem do it. In the early days, it was, I chose a server provider, and, oh yeah, VMware kind of plays in it. So VMware really grew how much control and how much power they had in buying decisions, and we're going through more of that change now, as to, as they're partnering we're going to talk about AWS and Microsoft and Google as those pieces. And Pat driving that ship. The analogy we gave is, could Pat do for VMware what Intel had done for a long time, which is, you have a big ecosystem, and you slowly start eating away at some of that other functionality without alienating that ecosystem. And to Pat's credit, it's actually something that he's done quite well. There's been some ebbs and flows, there's pushback in the community. Those that remember things like the "vTax," when they rolled that out. You know, there's certain features that the rolled into the hypervisor that have had parts of the ecosystem gripe a little bit, but for the most part, VMware is still playing well with the ecosystem, even though, after the Dell acquisition of EMC, you know, we'll talk about this some more, that relationship between Dell and VMware is tighter than it ever was in the EMC days. >> So that led to the Software-Defined Data Center, which was the big, sort of, vision. VMware wanted to do to storage and networking what it had done to compute. And this started to set up the tension between with VMware and Cisco, which, you know, lives on today. The other big mega trend, of course, was flash storage, which was coming into play. In many ways, that whole API gymnastics was a Band-Aid. But the other big piece if it is Pat Gelsinger was much more willing to integrate, you know, some of the EMC technologies, and now Dell technologies, into the VMware sort of stack. >> Right, so Dave, you talked about all of those APIs, Vvols was a huge multi-year initiative that VMware worked on and all of the big storage players were talking about how that would allow them to deeply integrate and make it virtualization-aware storage your so tense we come out on their own and try to do that. But if you look at it, VVols was also what enabled VMware to do vSAN, and that is a little bit of how they can try to erode in some of the storage piece, because vSAN today has the most customers in the hyperconverged infrastructure space, and is keeping to grow, but they still have those storage partnerships. It didn't eliminate it, but it definitely adds some tension. >> Well it is important, because under EMC's ownership it was sort of a let 1,000 flowers bloom sort of strategy, and today you see Jeff Clarke coming in and consolidating the portfolios, saying, "Look, let's let VMware go hard with vSAN." So you're seeing a different type of governance structure, we'll talk about that. 2013 was a big year. That's the year they brought in Sanjay Poonen, they did the AirWatch acquisition, they took on what the industry called VDI, what VMware called EUC, End-User Computing. Citrix was the dominant player in that space, VMware was fumbling, frankly. Sanjay Poonen came in, the AirWatch acquisition, now, VMware is a leader in that space, so that was big. The other big thing in 2013 was, you know, the famous comment by Carl Eschenbach about, you know, if we lose to the book seller, we'll all lose. VMware came out with it's cloud strategy, vCloud Air. I was there with the Wall Street analyst that day listening to Pat explain that and we were talking afterwards to a number of the Wall Street analysts saying, "This really doesn't make a lot of sense." And then they sort of retreated on that, saying that it was going to be an accelerant, and it just was basically a failed cloud strategy. >> And Dave, that 2013 is also when they spun out Cloud Foundry and founded Pivital. So, you know, this is where they took some of the pieces from EMC, the Greenplum, and they took some of the pieces from VMware, Spring and the Cloud Foundation, and put those together. As we speak right now, there was just an SEC Filing that VMware might suck them back in. Where I look at that, back in 2013, there was a huge gap between what VMware was doing on the infrastructure side and what Cloud Foundry was doing on the application modernization standpoint, they had bought the Pivotal Labs piece to help people understand new programming models and everything along those lines. Today, in 2019, if you look at where VMware is going, the changes happening in containerization, the changes happening from the application down, they need to come together. The Achilles heel that I have seen from VMware for a long time is that VMware doesn't have enough a tie to or help build the applications. Microsoft owns the applications, Oracle owns the applications. You know, there are all the ISVs that own the applications, and Pivotal, if they bring that back into VMware it can help, but it made sense at the time to kind of spin that out because it wasn't synergies between them. >> It was what I called at the time a bunch of misfit toys. And so it was largely David Goulden's engineering of what they called The Federation. And now you're seeing some more engineering, financial engineering, of having VMware essentially buy another, you know, Dell Silver Lake asset, which, you know, drove the stock price up 77% in a day that the Dow dropped 800 points. So I guess that works, kind of funny money. The other big trend sort of in that mid-part of this decade, hyperconverged, you know, really hit. Nutanix, who was at one point a strong partner of both VMware and Dell, was sort of hitting its groove swing. Fast forward to 2019, different situation, Nutanix really doesn't have a presence there. You know, people are looking at going beyond hyperconverged. So there's sort of the VMware ecosystem, sort of friendly posture has changed, they point fingers at each other. VMware says, "Well, it's Nutanix's fault." Nutanix will say it's VMware's fault. >> Right, so Dave, I pointed out, the Achilles heel for VMware might be that they don't have the closest tie to the application, but their greatest strength is, really, they are really the data center operating system, if you will. When we wrote out our research on Server SAN was before vSAN had gotten launched. It was where Nutanix, Scale Computing, SimpliVity, you know, Pivot3, and a few others were early in that space, but we stated in our research, if Microsoft and VMware get serious about that space, they can dominate. And we've seen, VMware came in strong, they do work with their partnerships. Of course, Dell, with the VxRail is their largest solution, but all of the other server providers, you know, have offerings and can put those together. And Microsoft, just last year, they kind of rebranded some of the Azure Stack as HCI and they're going strong in that space. So, absolutely, you know, strong presence in the data center platform, and that's what they're extending into their hybrid and multi-cloud offering, the VMware Cloud Solutions. >> So I want to get to some of the trends today, but just real quick, let's go through some of this. So 2015 was the big announcement in the fall where Dell was acquiring EMC, so we entered, really, the Dell era of VMware ownership in 2016. And the other piece that happened, really 2016 in the fall, but it went GA 2017, was the announcement AWS and VMware as the preferred partnership. Yes, AWS had a partnership with IBM, they've subsequently >> VMware had a partnership >> Yeah, sorry, VMware has a partnership with IBM for their cloud, subsequently VMware has done deals with Google and Microsoft, so there's, we now have entered the multi-cloud hybrid world. VMware capitulated on cloud, smart move, cleaned up its cloud strategy, cleaned that AirWatch mess. AWS also capitulated on hybrid. It's a term that they would never use, they don't use it necessarily a lot today, but they recognize that On Prem is a viable portion of the marketplace. And so now we've entered this new era of cloud, hybrid cloud, containers is the other big trend. People said, "Containers are going to really hurt VMware." You know, the jury's still out on that, VMware sort of pushes back on that. >> And Dave, just to put a point on that, you know, everybody, including us, spent a lot of time looking at this VMware Cloud on AWS partnership, and what does it mean, especially, to the parent, you know, Dell? How do they make that environment? And you've pointed out, Dave, that while VMware gets in those environments and gives themselves a very strong cloud strategy, AWS is the key partner, but of course, as you said, Microsoft Azure, Google Cloud, and all the server providers, we have a number of them including CenturyLink and Rackspace that they're partnering with, but we have to wait a little while before Amazon, when they announced their outpost solutions, VMware is a critical software piece, and you've got two flavors of the hardware. You can run the full AWS Stack, just like what they're running in their data center, but the alternative, of course, is VMware software running on Dell hardware. And we think that if VMware hadn't come in with a strong position with Amazon and their 600,000 customers, we're not sure that Amazon would have said, "Oh yeah, hey, you can run that same software stack "that you're running, but run some different hardware." So that's a good place for Dell to get in the environment, it helps kind of close out that story of VMware, Dell, and AWS and how the pieces fit together. >> Yeah, well so, by the way, earlier this week I privately mentioned to a Dell executive that one of the things I thought they should do was fold Pivotal into VMware. By the way, I think they should go further. I think they should look at RSA and Dell Boomi and SecureWorks, make VMware the mothership of software, and then really tie in Dell's hardware to VMware. That seems to me, Stu, the direction that they're going to try to gain an advantage on the balance of the ecosystem. I think VMware now is in a position of strength with, what, 5 or 600,000 customers. It feels like it's less ecosystem friendly than it used to be. >> Yeah, Dave, there's no doubt about it. HPE and IBM, who were two of the main companies that helped with VMware's ascendancy, do a lot of other things beyond VMware. Of course, IBM bought Red Hat, it is a key counterbalance to what VMware is doing in the multi-cloud. And Dave, to your point, absolutely, if you look at Dell's cloud strategy, they're number one offering is VMware, VMware cloud on Dell. Dell as the project dimension piece. All of these pieces do line up. I'll say, some of those pieces, absolutely, I would say, make sense to kind of pull in and shell together. I know one of the reasons they keep the security pieces at arm's length is just, you know, when something goes wrong in the security space, and it's not of the question of if, it's a question of when, they do have that arm's length to be able to keep that out and be able to remediate a little bit when something happens. >> So let's look at some of the things that we're following today. I think one of the big ones is, how will containers effect customer spending on VMware? We know people are concerned about the vTax. We also know that they're concerned about lock-in. And so, containers are this major force. Can VMware make containers a tailwind, or is it a headwind for them? >> So you look at all the acquisitions that they've made lately, Dave, CloudHealth is, from a management standpoint, in the public cloud. Heptio and Bitnami, targeting that cloud native space. Pair that with Cloud Foundry and you see, VMware and Pivotal together trying to go all-in on Kubernetes. So those 600,000 customers, VMware wants to be the group that educates you on containerization, Kubernetes, you know, how to build these new environments. For, you know, a lot of customers, it's attractive for them to just stay. "I have a relationship, "I have an enterprise licensing agreement, "I'm going to stay along with that." The question I would have is, if I want to do something in a modern way, is VMware really the best partner to choose from? Do they have the cost structure? A lot of these environments set up, you know, it's open source base, or I can work with my public cloud providers there, so why would I partner with VMware? Sure, they have a lot of smart people and they have expertise and we have a relationship, but what differentiates VMware, and is it worth paying for that licensing that they have, or will I look at alternatives? But as VMware grows their hybrid and multi-cloud deployments they absolutely are on the short list of, you know, strategic partners for most customers. >> The other big thing that we're watching is multi-cloud. I have said over and over that multi-cloud has largely been a symptom of multi-vendor. It's not necessarily, to date anyway, been a strategy of customers. Having said that, issues around security, governance, compliance have forced organizations and boards to say, "You know what, we need IT more involved, "let's make multi-cloud part of our strategy, "not only for governance and compliance "and making sure it adheres to the corporate edicts, "but also to put the right workload on the right cloud." So having some kind of strategy there is important. Who are the players there? Obviously VMware, I would say, right now, is the favorite because it's coming from a position of strength in the data center. Microsoft with it's software state, Cisco coming at it from a standpoint of network strength. Google, with Anthos, that announcement earlier this year, and, of course, Red Hat with IBM. Who's the company that I didn't mention in that list? >> Well, of course, you can't talk about cloud, Dave, without talking about AWS. So, as you stated before, they don't really want to talk about hybrid, hey, come on, multi-cloud, why would you do this? But any customer that has a multi-cloud environment, they've got AWS. And the VMware-AWS partnership is really interesting to watch. It will be, you know, where will Amazon grow in this environment as they find their customers are using multiple solutions? Amazon has lots of offerings to allow you leverage Kubernetes, but, for the most part, the messaging is still, "We are the best place for you, "if you do everything on us, "you're going to get better pricing "and all of these environments." But as you've said, Dave, we never get down to that homogeneous, you know, one vendor solution. It tends to be, you know, IT has always been this heterogeneous mess and you have different groups that purchase different things for different reasons, and we have not seen, yet, public cloud solving that for a lot of customers. If anything we often have many more silos in the clouds than we had in the data center before. >> Okay. Another big story that we're following, big trend, is the battle for networking. NSX, the software networking component, and then Cisco, who's got a combination of, obviously, hardware and software with ACI. You know, Stu, I got to say, Cisco a very impressive company. You know, 60+% market share, being able to hold that share for a long time. I've seen a lot of companies try to go up against Cisco. You know, the industry's littered with failures. It feels, however, like NSX is a disruptive force that's very hard for Cisco to deal with in a number of dimensions. We talked about multi-cloud, but networking in general. Cisco's still a major player, still, you know, owns the hardware infrastructure, obviously layering in its own software-defined strategy. But that seems to be a source of tension between the two companies. What's the customer perspective? >> Yeah, so first of all, Dave, Cisco, from a hardware perspective, is still going strong. There are some big competitors. Arista has been doing quite well into getting in, especially, a high performance, high speed environments, you know, Jayshree Ullal and that team, you know, very impressive public company that's doing quite well. >> Service providers that do really well there. >> Absolutely, but, absolutely, software is eating the world and it is impacting networking. Even when you look at Cisco's overall strategy, it is in the future. Cisco is not a networking company, they are a software company. The whole DevNet, you know, group that they have there is helping customers modernize, what we were talking about with Pivotal. Cisco is going there and helping customers create those new environments. But from a customer standpoint, they want simplicity. If my VMware is a big piece of my environment, I've probably started using NSX, NSX-T, some of these environments. As I go to my service providers, as I go to multi-cloud, that NSX piece inside my VMware cloud foundation starts to grow. I remember, Dave, a few years back, you know, Pat Gelsinger got up on a stage and was like, "This is the biggest collection of network administrators that we've ever seen!" And everybody's looking around and they're like, "Where? "We're virtualization people. "Oh, wait, just because we've got vNICs and vSwitches "and things like that." It still is a gap between kind of a hardcore networking people and the software state. But just like we see on storage, Dave, it's not like vSAN, despite it's thousands and thousands of customers, it is not the dominant player in storage. It's a big player, it's a great revenue stream, and it is expanding VMware beyond their core vSphere solutions. >> Back to Cisco real quickly. One of the things I'm very impressed with Cisco is the way in which they've developed infrastructures. Code with the DevNet group, how CCIEs are learning Python, and that's a very powerful sort of trend to watch. The other thing we're watching is VMware-AWS. How will it affect spending, you know, near-term, mid-term, long-term? Clearly it's been a momentum, you know, tailwind, for VMware today, but the questions remains, long-term, where will customers place their bets? Where will the spending be? We know that cloud is growing dramatically faster than On Prem, but it appears, at least in the near- to mid-term, for one, two, maybe three more cycles, maybe indefinitely, that the VMware-AWS relationship has been a real positive for VMware. >> Yeah, Dave, I think you stated it really well. When I talked to customers, they were a bit frozen a couple of years ago. "Ah, I know I need to do more in cloud, "but I have this environment, what do I do? "Do I stay with VMware, do I have to make a big change." And what VMware did, is they really opened things up and said, "Look, no, you can embrace cloud, and we're there for you. "We will be there to help be that bridge to the future, "if you will, so take your VMware environment, "do VMware cloud in lots of places, "and we will enable that." What we know today, the stat that we hear all the time, the old 80/20 we used to talk about was 80% keeping the lights on, now the 80% we hear about is, there's only 20% of workloads that are in public cloud today. It doesn't mean that that other 80% is going to flip overnight, but if you look over the next five to ten years, it could be a flip from 80/20 to 20/80. And as that shift happens, how much of that estate will stay under VMware licenses? Because the day after AWS made the announcement of VMware cloud on AWS, they offered some migration services. So if you just want to go on natively on the public cloud, you can do that. And Microsoft, Google, everybody has migration services, so use VMware for what I need to, but I might go more native cloud for some of those other environments. So we know it is going to continue to be a mix. Multi-cloud is what customers are doing today, and multi- and hybrid-cloud is what customers will be doing five years from now. >> The other big question we're watching is Outposts. Will VMware and Outposts get a larger share of wallet as a result of that partnership at the expense of other vendors? And so, remains to be seen, Outposts grabbed a lot of attention, that whole notion of same control plane, same hardware, same software, same data plane On Prem as in the Data Center, kind of like Oracle's same-same approach, but it's seemingly a logical one. Others are responding. Your thoughts on whether or not these two companies will dominate or the industry will respond or an equilibrium. >> Right, so first of all, right, that full same-same full stack has been something we've been talking about now, feels like for 10 years, Dave, with Oracle, IBM had a strategy on that, and you see that, but one of the things with VMware has strong strength. What they have over two decades of experiences on is making sure that I can have a software stack that can actually live in heterogeneous environments. So in the future, if we talk about if Kubernetes allows me to live in a multi-cloud environment, VMware might be able to give me some flexibility so that I can move from one hardware stack to another as I move from data centers to service providers to public clouds. So, absolutely, you know, one to watch. And VMware is smart. Amazon might be their number one partner, but they're lining up everywhere. When you see Sanjay Poonen up on stage with Thomas Kurian at Google Cloud talking about how Anthos in your data center very much requires VMware. You see Sachi Nodella up on stage talking about these kind of VMware partnerships. VMware is going to make sure that they live in all of these environments, just like they lived on all of the servers in the data center in the past. >> The other last two pieces that I want to touch on, and they're related is, as a result of Dell's ownership of VMware, are customers going to spend more with Dell? And it's clear that Dell is architecting a very tight relationship. You can see, first of all, Michael Dell putting Jeff Clarke in charge of everything Dell was brilliant, because, in a way, you know, Pat was kind of elevated as this superstar. And Michael Dell is the founder, and he's the leader of the company. So basically what he's created is this team of rivals. Now, you know, Jeff and Pat, they've worked together for decades, but very interesting. We saw them up on stage together, you know, last year, well I guess at Dell Technologies World, it was kind of awkward, but so, I love it. I love that tension of, It's very clear to me that Dell wants to integrate more tightly with VMware. It's the clear strategy, and they don't really care at this point if it's at the expense of the ecosystem. Let the ecosystem figure it out themselves. So that's one thing we're watching. Related to that is long-term, are customers going to spend more of their VMware dollars in the public cloud? Come back to Dell for a second. To me, AWS is by far the number one competitor of Dell, you know, that shift to the cloud. Clearly they've got other competitors, you know, NetApp, Huawei, you know, on and on and on, but AWS is the big one. How will cloud spending effect both Dell and AWS long-term? The numbers right now suggest that cloud's going to keep growing, $35, $40 billion run-rate company growing at 40% a year, whereas On Prem stuff's growing, you know, at best, single digits. So that trend really does favor the cloud guys. I talked to a Gartner analyst who tracks all this stuff. I said, "Can AWS continue to grow? It's so big." He said, "There's no reason, they can't stop. "The market's enormous." I tend to agree, what are your thoughts? >> Yeah, first of all, on the AWS, absolutely, I agree, Dave. They are still, if you look at the overall IT spend, AWS is still a small piece. They have, that lever that they have and the influence they have on the marketplace greatly outweighs the, you know, $30, $31 billion that they're at today, and absolutely they can keep growing. The one point, I think, what we've seen, the best success that Dell is having, it is the Dell and VMware really coming together, product development, go to market, the field is tightly, tightly, tightly alligned. The VxRail was the first real big push, and if they can do the same thing with the vCloud foundation, you know, VMware cloud on Dell hardware, that could be a real tailwind for Dell to try to grow faster as an infrastructure company, to grow more like the software companies or even the cloud companies will. Because we know, when we've run the numbers, Dave, private cloud is going to get a lot of dollars, even as public cloud continues its growth. >> I think the answer comes down to a couple things. Because right now we know that 80% of the spend and stall base is On Prem, 20% in the cloud. We're entering now the cloud 2.0, which introduces hybrid-cloud, On Prem, you know, connecting to clouds, multi-cloud, Kubernetes. So what it comes down to, to me Stu, is to what degree can Dell, VMware, and the ecosystem create that cloud experience in a hybrid world, number one? And number two, how will they be able to compete from a cost-structure standpoint? Dell's cost-structure is better than anybody else's in the On Prem world. I would argue that AWS's cost-structure is better, you know, relative to Dell, but remains to be seen. But really those two things, the cloud experience and the cost-structure, can they hold on, and how long can they hold on to that 80%? >> All right, so Dave here's the question I have for you. What are we talking about when we're talking about Dell plus VMware and even add in Pivotal? It's primarily hardware plus software. Who's the biggest in that multi-cloud space? It's IBM plus Red Hat, which you've stated emphatically, "This is a services play, and IBM has, you know, "just got, you know, services in their DNA, "and that could help supercharge where Red Hat's going "and the modernization." So is that a danger for Dell? If they bring in Pivotal, do they need to really ramp up that services? How do they do that? >> Yeah, I don't think it's a zero sum game, but I also don't think there's, it's five winners. I think that the leader, VMware right now would be my favorite, I think it's going to do very well. I think Red Hat has got, you know, a lot of good market momentum, I think they've got a captive install base, you know, with IBM and its large outsourcing business, and I think they can do pretty well, and I think number three could do okay. I think the other guys struggle. But it's so early, right now, in the hybrid-cloud world and the multi-cloud world, that if I were any one of those five I'd be going hard after it. We know Google's got the dollars, we know Microsoft has the software state, so I can see Microsoft actually doing quite well in that business, and could emerge as the, maybe they're not a long-shot right now, but they could be a, you know, three to one, four to one leader that comes out as the favorite. So, all right, we got to go. Stu, thanks very much for your insights. And thank you for watching and listening. We will be at VMworld 2019. Three days of coverage on theCUBE. Thanks for watching everybody, we'll see you next time. (upbeat music)

>> Live from Las Vegas, it's theCUBE! Covering Dell Technologies World 2019. Brought to you by Dell Technologies and its ecosystem partners. >> Hello everyone. Welcome back to theCUBE's live coverage here in Las Vegas for Dell Technologies World. I'm John Furrier with Dave Vellante. Dave, we've got Pat Gelsinger back on theCUBE. He stopped by yesterday, did a flyby after his keynote to kick off our intro section. He's back for the sit-down. >> (laughs) Welcome back. >> I can't get enough of you, Pat. >> CEO of VMware, Pat Gelsinger. >> Yeah, I love to photobomb you guys, so it was great. >> Anytime. I know you're super busy, business is going great. And you know, what a three years its been. I remember the keynote you gave at VMworld a few years ago. This was really on a time where, I would call it the seminal moment for you because you saw a vision, and we've talked privately and on theCUBE about, and you gave this speech of this is going to be the preferred future, and it was very visionary-oriented, but it ended up happening. That became the beginning of a run for VMware. And since then, you've been kind of chipping away and filling in all the tech pieces, the business model, and deals, with Amazon and now Azure and others. How are you feeling about it? What's the highlights? What's your perspective of where we are now? What's the notable accomplishments? >> Well you know, it's been just great. And you think about the run that we've been on where we, five years ago, we described a hybrid future. And you know, most people said, what are you, stupid? And you know, student body right to the public cloud. And now everybody is starting to understand the difficulty of replatforming, right? And says wow, this is really hard. I can spend millions and millions of dollars, in fact, one customer's estimate was that they were going to spend almost $1 billion replatforming all their applications to the cloud. And when they got them cloud-native, what do they have? The same apps. So imagine going to your board and saying I'm going to spend $1 billion just so I can be on the cloud, but give you no new business value. You've got to be kidding! And that's why this hybrid future, and as I like to joke, Andy, five years ago, Andy Jassy said if you're running your own data center, you're stupid. And Pat said if you're using Amazon, you're stupid. And now we're doing bro hugs on stage with each other. (laughter) >> And by the way, hybrid, you picked that trend that was right. Multi-cloud, though, came out of more a reality, less of an operating vision, 'cause hybrid cloud, you know, you saw the dots, connected those dots, but I think multi-cloud was much more of just a reality. When people started to realize that as I started doing stuff on premises, wow, I got native workloads on the cloud, and there are benefits for being in the cloud first for certain workloads. But then the multi-cloud thing comes up. >> And I think everybody has started to realize, and I really, as I would say, I think every CIO needs a three-cloud strategy. Making their private data centers into a proper operating private cloud. And some of this week's announcements, I'm sure we'll get back to those a little bit, to me are just a huge dimension. You know, VMware Cloud on Dell EMC, you know, a huge accelerant of making your private data center op like a private cloud, right, at scale. Second, you need a primary public cloud partner. And I think most people should pick a primary. Not one, a primary, and then a secondary cloud, right, you know, as their partners. And then you have your range of SAS offerings. And I think that needs to be the core, right, of every IT, CIO's strategy for the future. And our objective is to create an environment between what we're doing with VMware Cloud Foundation, and now VMware Cloud on Dimension. What we're doing with Amazon, our preferred partner for the public cloud offering. What we announced this week with Azure, right? Our 4000 other cloud partners, including, you know, very successful relationship with IBM. And saying, okay, that's your infrastructure. And the bulk of your workloads should run on a VMware environment that we can operate across that, with the same tools, the same interfaces, the same security, the same management tools, and then use the other cloud services as they bring you business value. You're a fan of Tensorflow? Go for it, baby. Right? You know, and use it in your app. You love function as a service with Lambda, go for it. But the bulk of your workload should lay in here and use these where they have business value. >> And to follow up on the three legs of the cloud stool, the CIO's legs, number three is for what? Is it for risk mitigation, exit strategies, or more specific best-of-breed, horses-for-courses type of workloads. >> Yes, yes, and yes. To some degree, really it's saying, nobody wants to say, I'm only in one. Right? Nobody wants to lock in for it. Also you know, clearly, hey, you know, these are technologies that break. You get more resilience that way, right? You want to be able to manage your cost environments. There's clearly this view of okay, you know, if I can do one, two, and three, I can do N. 'Cause most people are also going to end up picking, oh, I'm in Hong Kong. Okay, I need a Hong Kong cloud, because my data can only go there. You know, I'm in Malaysia, oh, they require all data to be there. 'Cause a practicality, if you're a big enterprise company, it's not just going to be three. You're going to need to be four, five, and six as well, for regional. And then you're going to acquire somebody, they're using a different partner. It really says, build an operational environment that works that way. Give myself business flexibility. I have application flexibility, and if I've done that, I really can move to the other environments that my business requires. >> I think one of the reasons why you guys have been so successful, if I go back five or six years, I remember you laying out the market, the market segmentation, you're obviously close to customers. You're a very clear thinker. You've obviously looked at the market for multi-cloud. How do you describe that, how do you look at the TAM, how big is it? >> Well you know, if you think about cloud today, right, we're closing in on $100 billion of the public cloud. You add SAS to it, you know, you got almost another $100 billion at that level. And you know, the overall data center market is probably on the order of, you know, $1 trillion-ish. >> Give or take. (laughs) >> Yeah, on that order. And then you know, you throw the operations costs inside of it, you're probably looking at something that's, you know, on the order of $2 trillion as well. So this is a big market, right? You know, part of the excitement that people are seeing in this cloud environment, is that they can just go faster. And as I described in the keynote today, we want to enable every one of our customers to stop looking down and look up, right? Spend less time looking down at the infrastructure. We're going to operationalize it, we're going to automate it for you, we're going to take care of it so that every one of your engineers can become software engineers building app and business value. >> I want to ask you on that point, because one of the things, I was talkin' last night, the analyst said at the briefing or the reception was, having a debate with one of the strategists in Dell, and I'm like, look it, outcomes are great at the top of the stack. Looking up, you want outcomes. But during the OSI stack days, no one cared about outcomes. It was either token ring or Ethernet. Speed won, so certain things have to be speed-driven, world-class, and keep getting better. And so that's what we're seeing as an infrastructure requirement. Horizontal scalability, operational scale. So that's a speeds and feeds game. So the outcome there is faster (laughs), and simpler. Up the stack, data becomes a big part of that. That, more, is where we see outcome. Do you see it that way, Pat? Because you know, again, infrastructure is often, that's how they said it on stage. We want to have whole new-paved, new infrastructure for this generation, essentially a refresh of infrastructure. Okay. Well, what does it look like? It's got to be fast, got to be flexible, software-defined. Your thoughts? >> So you know, clearly, I mean, what we're trying to do is we build this common infrastructure layer. And build an environment that allows you to be fast, but also allows you to be in control and cost-effective. Because if you would say, oh, I just want to be fast, ah, that doesn't work, right? We still have limited budgets, and you know, people, someday there's a CFO day of reckoning. But you also have to realize, part of the hybrid cloud laws that I described this morning, you know, one of those is the laws of physics, right? Hey, my factory automation for robotics needs to be 40 milliseconds, period. And if I round-trip to the cloud at 150 milliseconds, guess what? (laughs) >> Latency. >> Right. You know, my image recognition for being able to detect my autonomous vehicle is less than 50 milliseconds. I can't round-trip to the cloud. It has to be fast, right, but we also need to be able to push more of this data, more of the inference of my machine learning and AI closer to the edge. That's why, you know, you heard Michael talk about, and Jeff talk about this explosion of data. Most of that data will be at the edge. Why? Because every camera, you know, every sensor will be developing it, and I'm not going to round-trip it to the cloud because of economics. I can't afford to take all that data to the cloud. It's not just the latency. >> Latency matters. >> Yeah. And so for that, so I can't take it to the cloud, I got to be able to compute locally. I got to be able to apply the inference of my AI models locally, but you know, I also then need to scale aspects of cloud as well. My third law, of course, was regulation, where you know, guess what? I was just with a major customer in Latin America, and they said they are repatriating 100% of their data and applications out of the public cloud, 'cause the new president, right, is assisting on data only in his country for all of their nationalized resources and assets. >> So that's driving the change. This brings up the multi-cloud kind of thing earlier. You guys got to play in all the ponds out there, in the industry. But let's talk about on-stage here at Dell Technologies World. You were on-stage with Michael Dell and Satya Nadella, and I was lookin' up there. I'm like, man, the generational knowledge of the three people on-stage, the history. >> (laughs) I think that just means I'm getting old. (laughs) >> Well I mean, you've seen it all. I mean, from Intel, to EMC, to VMware. Dave and I, Dave's a historian of tech, as he'll self-claims, but I'm up there, I was pretty blown away. You guys are leading the industry. What kind of moment was that for you, because now you've got Microsoft doing a deal with VMware. Who would've thought that would happen? >> Well, maybe two different aspects to it. You know, one is, I've known Satya for over 25 years. You know, he was sort of going through the Microsoft ranks, Windows NT, SQL, et cetera. (laughter) You know, at the same time I was. So we got to know each other. Almost 25 years since our first interactions. When Michael Dell first came to Intel to meet Andy Grove to get microprocessors so he could start his business, I was there. So I mean, these relationships are decades old. So in that view, it's sort of like, hey Satya, how's the wife, you know. (laughter) Hey Michael, how's Susan doing? Really, it-- >> But you haven't even gone anywhere, you're still in the industry. (laughs) >> Yeah. But then to be able, the announcement was really pretty special in the sense that I call it 20 years in the making. You know, not a year or two, 20 years in the making, 'cause VMware and Microsoft has essentially been at odds with each other for two decades. You know, at that level. And to be able to be on-stage and saying, that's right, we're cooperating on cloud, we're cooperating on client, and we're cooperating on futures, okay, that's a pretty big statement as well. And I think customers respond very positively to that. And you know, I'm-- >> It's been a bold move, and you also made a bold move with the cloud, too, Pat. I got to say, that was another good call. Partnering with Andy Jassy. Again, once, both idiots, I guess, calling each other clever, you know. (laughs) Hey, public cloud, at odds, partner. Boom. >> And I really think this idea, moving headwinds to tailwinds. And you know, the Amazon partnership with Andy, and as we say, it's our preferred cloud partner, VMware Cloud, our native US hub, VMware-offered service. You know, super committed to it. We're closing in on 2000 customers on that now. >> Clarify the Amazon relation. I saw some press articles that kind of missed, skewed a little bit. They kind of made it sound like the Azure deal was similar to the Amazon deal. So just explain the difference between the VMware deal with AWS and Andy Jassy, that relationship, and the other cloud ones. Take a minute to explain that. >> Yeah, thank you. And what we're doing with Amazon is VMware is offering a cloud service that I operate for customers, that runs on Amazon. And that is a VMware-delivered service. They're our preferred partner. We're not bashful about that, that if we have the choice, that's the one to go to. It's going to be best. But what we've done now with Azure is we've made the VMware Cloud Foundation, the same underlying components, available with CloudSimple and Virtustream, they're partners, to have a VMware Cloud Foundation offering delivered by Microsoft as a first-party service. So VMware Cloud, VMware is delivering it. In the Azure for VMware services, that's being delivered and supported by Microsoft. >> And that's the same deal you did with IBM. >> It's very, the same-- >> Google and other ones. >> Yeah, the same as we've done with our 4000 other cloud partners, right? And obviously, Virtustream and CloudSimple are part of that 4000, and they're making the VMware Cloud Foundation available to Azure customers now. >> And what's the benefits to VMware's customers for those deals? >> Well, imagine that you're somebody in, Walmart was quoted in the press release, as an example. Walmart's a big VMware customer. Walmart is also a big Azure customer. So their ability to say, oh, I can have a hybrid environment makes a lot of sense for that kind of customer. So we really do see it as saying, you know-- >> Customer-driven, basically. >> Absolutely. And people said, which are you going to sell to us? Well in most cases, customers have already decided who their major cloud partners our. We're saying that VMware offering, even though we're first and best with Amazon, we're saying as they make their cloud choices, we'll have a valid VMware Cloud Foundation offering available. >> And best, I want to understand best. Best is, in part, anyway, because of the engineering you guys have done. When we interviewed Andy Jassy in November at re:Invent, he said you can't have a lot of these types of partnerships. And it's very deep integration. Is that why it's best? And what makes it best? >> Yeah, I call it first and best for two reasons. One is because we are engineering, we are co-engineering, the bits first get done on VMware Cloud, and then we make 'em available to the other partners. That's where we're doing the core engineering, the innovation. Andy has hundreds of engineers working on this. I have hundreds of engineers working on it. So it's first and best from an engineering sense. And, given it's my service and my offering, we're selling it aggressively in the marketplace, positioning it as part of the broader set of solutions and leveraging that, like you saw this week with the Dell EMC offering, VMware Cloud on Dell EMC. It's leveraging all that first and best work to now bring it on-premise as well. So it really is both the engineering as as a go-to-market. >> I'm going to ask some CEO questions. (laughs) So Tom Sweet has said they're happy to have the Class V transaction behind them. I'm sure you're glad, too. Thank you. That was very generous of you. >> (laughs) >> You've been incredibly good at acquisitions. I mean, obviously Nicira, Heptio, CloudHealth, AirWatch, I mean, on and on. >> VeloCloud. >> VeloCloud. I mean, most acquisitions, frankly, don't live up to their objectives. I think that's not the case for VMware. So now you're, good news is you draw off a lot of cash, so you're building up that pot again. How do you see, going forward, use of that cash? R and D, M and A, maybe you could make some comments there to the extent you can? >> Yeah, and you know, we said the primary ways we use cash, stock buybacks and M and A. And that continues. We did the special one-time dividend, which helped Dell go public. Everybody's happy. The market's responded super positively on both the Dell side. They're up, what, 40% since they go public. VMware up almost 50% this year. Just tremendous. >> Tremendous, $80 billion value now, awesome. >> Yeah, just tremendous. And, right then, we said going forward, it's business as usual for us. We're going to continue to do stock buybacks. We're going to continue to do M and A's. As you've said, we're good at this acquisitions stuff. And part of that is, I call it, imagine you're a hot startup company. And you say, do I want to be part of VMware? And we try to answer these questions. Do we have vision alignment? >> (laughs) >> Second is, can we accelerate your vision? Because most startups, you know, I mean, you talk about unicorns and so on like that. But what really motivates them is their vision. And if they believe their vision is going to be accelerated as part of VMware, so they're on this and we're going to turn 'em to that, aw man, they get excited. Do we have a cultural fit? I mean, with every CEO of our acquisitions, and HR does, we really, are they going to fit our team? Because you know, cultural issues, you can't butt your heads day and night. Life's too short. >> Certainly VMware, you guys are (laughs) that culture's very hardcore. Work hard, play hard. (laughter) >> Yeah, and you know, it has to be this deep drive for technical innovation, right? The technical due diligence that we do with our startups. Right? It's sort of like, you know, this is like a PhD exam for these, I mean, they really got to know their stuff. >> Yeah, so people don't fit in the culture at VMware, and there-- >> And we've said no to a number of potential acquisitions over cultural issues as well, if they're just not going to fit. And hey, we're not going to be perfect, but the fact that we can bring these companies in, accelerate their vision, give 'em a culture that they're excited about. You know, we have maybe 90-ish% success rate. The industry average is below 50% >> Yeah, fantastic track record. I mean-- >> And that just gives us the ability to do organic and inorganic innovation, which to me is like, a potent recipe. >> And you got the radio conference coming up. What will your talk, theCUBE will be there. Pat, you've created great shareholder value. You turned those headwinds into tailwinds, and we were watchin' the whole time. It's been great to watch. And what's next? You have your VMware tattoo still on from VMworld? (laughter) Like you have a jail tattoo? >> No, I'll tell you >> Cute tattoo. >> a little inside, I'll tell you a little inside story. My wife, you know, after the VMworld keynote with the tattoo on, we were leavin' on vacation two weeks later. And all she said to me after the keynote was what's that tattoo thing, it better be gone by the time we leave for vacation. (laughter) It's like, there was no, honey, that was a great keynote today, it's like, that better be gone! (laughs) >> Nothin's better than watchin' that video and that CUBE sticker we had on your hand. Pat, great to see you, as always. Great commentary, great analysis. Congratulations on all the success with VMware. Again, the transformation's just getting started. We're seeing a lot more good things for you guys as well. >> Yeah, and you know, this has been a great week in some ways. I sort of joked this morning on-stage that, it almost felt like VMworld. We talked about VMware technologies and that Dell partnership accelerating so well. >> It's not AMCWorld, it's DellWorld now, it's a whole new vibe. >> (laughs) And you know, with that, you know, I just really believe in the superpowers that I talk about, we're just getting started. So we're going to be doing this a long time together. >> What's on your plate in front of you now? You got VMworld coming up in a few months. Priorities, objectives, what's on your plate? >> Well, I have to leave some of the secrets for what we're cookin' up for VMworld this year. But some of these steps clearly, in the developer container space, super important for us to really make some progress there. Obviously, we'll have some incremental cloud announcements as well. >> ContainerWare rhymes with VMware. (laughs) >> Yes, that's very good! We have an advertisement on that coming out, so a new ad. But it really is, I think, that topic area's one that, how can we really solve that for customers that really can deploy at scale containerized environments for an enterprise workload. So, excited about that area. And you know, maybe just a few deliverables from what we announced this week. >> Alright, take your CEO of VMware hat off, put your CUBE analyst hat on. What's the most important story here at Dell Technologies World, if you were a commentator? You can't say VMware 'cause that's biased, but you got to be objective. You can say VMware if an objective. What's the most important storyline here as a backdrop for Dell Technology Worlds, what's the real net net to customers? >> Well you know, I think, and I'll say, as exciting as the Microsoft announcements were, I think the most important thing was VMware Cloud on Dell EMC, on-prem. Because to me, you know, the fact, I go to CIOs, and I've done this probably five times since the keynote finished on Monday. And I say, how many of you have fully updated your hardware, your firmware, your operating systems, your networking stack, your compute stack, your management on the latest releases, all of them patched, upgraded appropriately for your environment? >> And they say, their eyes roll. (laughs) >> And the answer is none. Not some, none. I have customers that are askin' me to extend support for vSphere 4.5. It's like, what, that's been EOL'ed for a year and a half, what are you talking about, right?! But the reality is that most people go to the cloud, public cloud, not because it's more cost-effective or because it's better, it's because it's easier. So what we've really said is we can make easy in the private cloud and truly deliver that hybrid cloud experience. And I think the customers really experience the TCO benefits, the acceleration, the reductions in their operational environments, the personnel associated with it, the security benefits of being always patched, upgraded the most release. You know, now you're talkin' about attacking that other $1 trillion of operational costs that they're bearing in the personnel and so on. To me, that is like, so powerful if we really get that engine going. >> And the simplicity that comes out of that, is just-- >> You know, and again, the demo that we showed. That was the VMware Cloud on AWS being able to demonstrate, now, a complete picture into the on-premise environment. That's powerful. >> Pat Gelsinger, CEO of VMware. I know he's got to go. Thanks for your generous time, I know you're really busy. Again, Pat Gelsinger. >> Love you guys, thank you. >> Thanks, Pat. >> Love you too. Pat Gelsinger, CEO of VMware, creating a lot of shareholder values, got a lot of tailwinds at their back. VMworld's coming up, theCUBE, of course, will be there with two sets. As usual, theCUBE cannons, two sets here, firing cannonballs of content here at Dell Technology World. I'm Jeff Furrier with Dave Vellante, stay with us for more after this short break. (electronic music)

(upbeat dance music) >> Live from Barcelona, Spain, it's the Cube. Covering Cisco Live! Europe. Brought to you by Cisco and it's ecosystem partners. >> Hello everyone, welcome back to the Cubes live coverage day two of three days of wall to wall coverage here in Europe, in Barcelona, Spain for Cisco Live! 2019. I'm John Ferrier with Dave Vellante, Stu Miniman hosting a great load of interviews this week here for Cisco Live! Guys, kicking off day two. Day one was all the big announcements. Cisco putting in all the announcements really setting it in and the messaging coming together. The product portfolios filling out. Clearly, Cisco is adopting a path to the cloud. Taking their data centered business, securing that, bringing that data center into the cloud, kind of hybrid, Multicloud. Big message around Multicloud and then under the hood, data center. Traffic patterns are changing, it's not a rip and replace, it's an extension to the environment. Cisco's intent based networking plus cloud plus cloud center management. Lot of stuff. We did discuss that yesterday. But I want to get your take. Is Cisco's positioning viable and what does it mean vis a vis the competition because Cisco is a blue chip tech player. Certainly have zillions of customers. Very relevant. This is a huge impact, how they position themselves, Stu. >> So John, you remember a few years ago we were saying "Hyper scale clouds, the public cloud providers are going to take over the world" and boy, Cisco's in trouble because if a third or half of the market all the sudden evaporates from them, those enterprise buyers of switches and routers and everything else like that, Cisco is doomed. Well, you know, we listened to the keynote yesterday and Cisco's talking about all of their solutions anywhere and when you go through the ecosystem of public cloud, hybrid cloud, multicloud. Say does Cisco have a play there? And the answer is absolutely. It's not just the AppD acquisition, which has software and AWS but SD Wan is going to be a critical component to get from my data centers to the public clouds. Cisco has software and solutions and consulting to help customers in all of these environments so we always know that there's partnerships and there's competition. There's a lot of players out there but it was good to see them talking a lot about what they are doing with Kubernetes, with Amazon because you can't talk about cloud, either public cloud or multicloud without first talking about Amazon. Last year, we were a little critical, John, and said "Okay, Google's great but Google's number three or four." So, you got to be there with Amazon, you got to be there with Microsoft, and ServiceField. We've already interviewed a couple of service providers, always been a strength for Cisco to be in there and so good positioning. We talked yesterday a bunch about the bridge to possible and where to go but the more I think about that, anywhere is what Cisco's branded everything and that's when you talk Multicloud. Multicloud really a whole bunch of clouds and a whole bunch of things and therefore, I need a player that's going to help give me coverage in all of these environments and Cisco is making a strong case to be that. >> And Dave so Stu's right. A couple years ago, we were critical of Cisco and I think rightfully so. I think the whole industry looked at them as not in the middle of the fairway and certainly the recovery shot for Cisco is really strong because a lot's changed. Go back a few years. They didn't have a good ecosystem for developers. They didn't have a good open source position. They kind of were, do I go up the stack or not but they had the core networking so a lot of people were saying, "Hey, if Cisco doesn't make a move, they're doomed." We were one of them so a lot's changed. You're seeing the adoption of microservices, containers, APIs, the growth of DevNet that Susie Wee has initiated. It's clear proof, in my opinion. Then you got the data center guys saying, "Hey, we can take networking and take this and enable cloud." So Cisco, making good moves, put themselves in pole position for growth. >> Well I think the first point is, if you roll back 10 years ago, it was not just Cisco we were critical of, it was clear to us that cloud was where all the growth was and if you didn't have a public cloud, you were going to be in trouble unless you developed a cloud strategy. So, certainly Cisco, Dell EMC, now you know Dell MC, Vmware, none of them really owned a public cloud strategy and five years ago, they had to figure it out. Well, they figured out that actually managing Multiclouds is a great opportunity and so Cisco's got a viable strategy. Networks between clouds are going to flatten, they're going to need management. It's specifically, as it relates to Cisco and maybe their competition, they have to position themselves as our Multicloud management system is higher performance, and more secure than the competition. That's what they have to sell their customers on and the second piece of that is they get a transition from selling ports to selling software. And they're making that transition so, I like their strategy by the way, I also like Vmware's strategy. They capitulated to AWS, and now they're tight with AWS. IBM went out and paid two billion dollars for software so they've got a cloud strategy. Oracle's got a cloud strategy, Microsoft's got a great cloud strategy so if you go through and tick off-- >> They have clouds so let's just understand something. There is clouds and then cloud strategies so Amazon. >> The $34 billion that IBM is paying for Red Hat is giving them a Multicloud strategy more than just saying we have a bunch of data centers and bare metal. >> So they play in both, right? And maybe not so much in the public cloud, I would argue that their public cloud has failed to meet their expectations like IBM. And that's why they had to pay $34 billion for Red Hat. I would say just the opposite about Microsoft, their public cloud strategy has been an enormous success and they're very well positioned for Multicloud. >> Okay so let's just put it on the table. So, Cisco looks at the public cloud as partners, not competitors so Amazon, Assure, Google aren't competing with Cisco. Are they or are they partnering? Well, understanding competition is all about understanding who has a cloud so I would say Cisco's strategy to partner just like SAP did, just like everyone else and Dell did, that's the competitive, not cloud so, or maybe. This is the question; are the public clouds competitive to Cisco? >> They're frienemies, John. >> Oh no, the answer is yes, there is no question about it. They're growing at 20, 30, 40% a year. Cisco and IBM, HP they're growing at much lower, single digits. >> So John, we know if Amazon, if there is a profitable space that they can offer, a competitive service, they will. Security, you said, Cisco's got a great position security both what they've had for a long time and they've done acquisitions like Duo more recently and we've seen lots of pieces of the public cloud ecosystem that Cisco's bought over the last few years. Clicker was one that we've spent some time talking about but absolutely, Amazon goes after some of those pieces so they're going to partner. Cisco's got, the last I checked, at least three dozen products on the AWS marketplace but they can live there but there will be competition. >> Cisco's got some huge assets in this game, they got 800,000 plus customers, they are 60% of the networking market so they own the install base. It's really the only market you can think of that's a major market where the dominant player still owns 60% of the market and they've never been able to. >> Cisco for networking and Vmware for the hypervisor are very similar in that case and both have now had a similar strategy as to how their going to multicloud. >> Well, that's the most interesting competitive dynamic, in my view, is Vmware and it's acquisition of Nicira and obviously Cisco. Cisco's not going to take this lying down, they've got ACI and they claim number one. They didn't say whose data that was. I was looking and squinting for that is that IDC that got their four star. >> Well lets talk about growth because you know how I always complain about market researches aren't on the mark in terms of the reality of where the market is. So, you've mentioned growth. So, are we, if we're early in cloud growth, that's where the growth is, what is the cloud adoption going to look like over the next 10 to 20 years? Is it going to look more like public cloud or is it going to look more like on premises evolving to cloud operations and if the growth of cloud operations is all things, wide area network, image and SV wan, then there's more growth coming. So, if that's the case, is Cisco going to be able to capture that growth for the future? >> Well, in terms of growth, I think AWS is on it's way to being a $100 billion revenue company. And that's pretty impressive given where they are today, I mean they're going to triple in revenue so that's where the growth is. Cisco's already participating in a huge tam. What they've got to do is hold on to that business and identify new opportunities where they can manage multicloud instances and compete effectively with Vmware who's coming at it from the hypervisor and now, as I said yesterday, try to do to networks and storage what it did for systems and then IBM, Red Hat coming at it really from the applications perspective and with a services view. Microsoft, with a foot in both camps. You got Oracle in it's little niche. It's just a really interesting. >> Well, you've got an installed base that's moving into the cloud. You got net new companies that are going to be started. Might have on prem gone full cloud, this is the question that everyone's going to ask. I think Cisco can take their existing base with moving packets from point A to B and storing and making data more intelligence. Moving data around is a big networking phenomenon. >> Here's the question; Andy Jassy would say, "We believe there are going to be far fewer data centers in the future," that most data is going to live in the public cloud. The likes of Mike Liddle, Charlie Robbins, et cetera, I think they see the world as a hybrid world. That there's going to be more data that's in a hybrid, on prem plus cloud then is going to be in the public. >> I love Andy Jassy but I'll just say, first of all and I'm saying this biased on his perspective and I think he's right at one level. Why wouldn't Amazon see people moving data centers to the cloud? I get that. I say that it's going to be in the networks. That's where the action will be. Where are the networks, are the networks in the cloud, are the networks on premise, are the networks on a phone, IOT? So, you see IOT and Edge coming together, if it's all one network, then you're going to have the values going to be in the network, not necessarily the clouds per say or in shared value. >> You talk about Edge computing and IOT, Cisco's got Meraki which is going strong. SD Wan is a critical component in this multicloud piece. They're really posed to drive this next generation of 5G, not something we've dug into a lot yet but it is finally coming really soon here and Cisco has a lot of those pieces to be able to hit the next wave. >> It always comes back to the data, in my opinion, and the leverage point for data are sass. If you own the applications business or you're doing well there, you're in a good position. All the data's running over Cisco networks so that puts them in a really good position and as we know the likes of AWS and Microsoft, Alibaba, et cetera. They are trying to get as much data into their cloud as possible. >> And what I loved yesterday in the keynote is data was actually one of the central components that they talked about which the Cisco I know of 10 or 20 years ago, that was just bits that ran over our pipes. So they understand the value of data and their drive into that market. >> Well, we've been saying on the Cube now for nine years. Data's at the center of the value proposition. Data at the center, value proposition, this is actually happening. We see a lot of growth in cloud. Dave, good commentary. Stu, well done. We're going to have Sasha Gupta, all the leaders coming on the Cube here from Cisco. We'll breakdown and we're going to ask them the tough questions. Stay with us for day two coverage here in the Cube. Live in Barcelona, I'm John Ferrier, Stu Miniman, Dave Vellante breaking down all the action. We'll be right back with more after this short break. (light techno music)

>> Live from Barcelona, Spain, It's theCUBE, covering Cisco Live! Europe. Brought to you by Cisco and it's Ecosystem partners. >> Welcome to, guys, Cisco Live. Introducing some new innovations, Stu and Dave, around reinventing networking. Couple big themes, big announcements around ACI Anywhere application-centric infrastructure, HyperFlex, and the new CloudCenter Suite, where they are doubling down on cloud, redefining the network. Stu we've been here last year, been watching Cisco. Policy based, intent based networking. Cisco's tying it all together with new branding, The bridge to tomorrow. Your thoughts. >> Yeah John, I actually, I like some of the new branding. The bridge to tomorrow. I've been critical of Cisco. Cisco always said, oh well, you know networking's everywhere and it's really important. Well okay, but where's the meat, where's the detail behind this? They've done a number of acquisitions in the space. They're making sure they understand where they are. They had some failures along the way. I mean you know call a spade a spade, John. They are going to be a leader in multicloud. It's where they want to be, but they had some falters along in being a public cloud. You know the Intercloud message that they had. They confused the service providers. We didn't understand how they played with the hyperscale players and now they're understanding where they sit. SD-WAN, critically important. Where they live in the Data Center and It's interesting we talked about do we care about the Data Center or do we care about where the data is centered, and of course that is not in one place, but it is many places. We know customers today live in a multicloud world. How I get to my data, how I leverage my data is critically important, and the networking and management is something that is critical across all those. Right, as you said, ACI and HyperFlex, the CloudCenter Suite I know is an area I know we're going to dig into a bunch this week, because cisco has an opportunity to play across these environments. But Cisco has been trying for a long time to be the manager of managers in these environments. I think back to things that Dave Vellante and the Wikibon team and I have done for years, talking about how you manage in this heterogeneous world and it's just, instead of multivendor we are talking multiclass. >> Multiclass. And you know what everything is coming together, Dave. We've been covering Cisco, with looking at the timing of the positioning. It seems to be coming together and around the rebranding, which by the way I agree with Stu, I like it. The bridge to tomorrow, it resonates with me. Maybe because I am from the Bay area. But they're bridging two worlds, they're bridging On-Premises and cloud together in a very seamless way and elegant way architecturally. So the branding ties in with really much a rounding out of the portfolio, so a lot of storylines to follow: the new branding, Chuck Robbins getting his sea legs now as Cisco goes to the next level. And clearly they see multicloud as their positioning because this has been Cisco's core position for many many years, this idea of enabling other people to do innovation, whether it's applications and work loads. Now they're connecting two worlds. Your thoughts on the timing and their position vis-a-vis the industry. >> Well, Cisco talked this morning in the keynote about another bridge. On one side of the network is users and devices. On the other side of the network are applications and data. And we've talked for years about how the network is flattening and traffic is going east, west, et cetera. But interclouding if you will, puts increased pressure on that and it's clearly Cisco's strategy to be the best at connecting, whether it's On-Prem and public clouds or between public clouds. Cisco's got to make the case that on our networks you're going to be higher performance and more secure. That's certainly what they're implying. They're also making a big transition from being a hardware company to a software company. When you listen to VMware talk about Cisco, they talk about oh they make the best hardware, the best switches. Cisco's like, they're talking software capabilities across the network, new architectures, reinventing, coming at it from the network which is obviously their strong point. And it just really sets up an interesting competitive dynamic between Cisco, certainly VMware, who's trying to do networking and storage what it did to servers. And now you've got IBM and Red Hat coming at it from applications and the development perspective. We're here in the DevNet Zone, and I think that's the other piece of the announcements that we're hearing today is developers can actually program with things IoT and new Use Cases. So, pretty exciting times. >> Stu, storylines around the Data Center, you made the comment and it was kind of a play on words on the keynote. Data is centered, centered, dash, ED, center-ed. So the Data Center concept is moving into the data being center the value proposition. This has been interesting because if you look at what DevNet has spawned and DevNet create under Susie Wee's leadership, you saw the role of APIs. So if data moves around the network, and that's the core competency of Cisco, moving packets from point A to point B, adding automation, adding intelligence, with intent based networking and cloud enabling it on the other side. You got to have access to data, it's got to be traversing and inter operating with multiple environments. This is now a architectural standard. Is Cisco from a product portfolio standpoint, whether it's security analytics, cloud apps management, IoT, and networking. Does it all come together? Your thoughts. >> Yeah so, first of all, Cisco plays in a lot of these environments. We talk not just Data Center but when you talk about branch office, something Cisco has been doing a really long time. And how do I network between all of those remote locations and my central location. And my central location might not be the data center, it might be a or multiple public clouds out there. So Cisco's been attacking this backed WAN optimization many years ago. SD-WAN really has taken that and much more. Super important when we talk about this multicloud environment and how I get that connectivity, so they're there. And Cisco from the ground up has gone through a lot of rebuild. So the CloudCentre Suite we talked about, micro services architecture built with Kubernetes, into that API economy that we're talking about which is a lot of what we talked about here in the DevNet Zone. Absolutely Cisco has, they're known in this space. They have a lot of the skills. They have a very broad platform of products out there. David Goeckeler this morning, he was just reeling off all the different areas they play to in saying, you know, we've got like 6,000 people in the opening key note and he's like I came and look at this room and I've got like 4x the amount of engineers working on your network and security issues that were here. Like 24,000 people. It's an army. There's a few companies outside of Google, Amazon and Microsoft that can haul on that engineering strength and that's just the internal place, what we love. We talked to Susie Wee and she's like we've got 500,000 on our community platform helping to build. IT, OT, IoT, all the network, all the security pieces so Cisco is not new to a lot of these, but is refocused on a lot of what they're doing. >> So the big news obviously is the ACI Anywhere and HyperFlex Anywhere and putting the data center, connecting those two worlds. You got the cloud as well. So the role of hyper-convergence is certainly key in this announcement here today. ACI Application centric-structured infrastructure is codewords for policy-based, intent-based networking, all stuff that Cisco's used to doing. Then when you connect it to the cloud, you've got Data Center, On-Premises, Cloud and Hyper-Convergence at the edge. This is the core, right? They've got the edge, multiple environments. You've got Cloud and you've got the Data Center kind of legacy environment which is evolving. Those are all coming together. Stu, what is, this is a cross-domain challenge. Is Cisco prepared? David, I'd love to get your comments on this as well, to be that domain vendor? Because multicloud truly will require data to be moving around, for policy to be automated and deployed across domains. This is a huge challenge. Yeah I mean John, it is challenging and if you look at the hyper-convergence infrastructure space, where Cisco plays with HyperFlex, goes up against VMware vSAN and Nutanix and the rest there, the people that sell that and build that aren't necessarily the ones that really understand multicloud and we've seen that space maturing for the last couple of years. Obviously Cisco's got a right to be at the table there and they're moving in that direction, but the data center folks and they are data center folks that have done networking and storage and all that piece, are they getting trained up and helping to help bridge to that multicloud environment? I think there's still a lot of work to go when I talk to the channel, when I talk to the people that are out there going to market on that. >> Well that's the big challenge is how do you move the base, how do you get them from point A to point B without spending a billion dollars. You heard Gordon today stand up there and say you got to change. Now, and he admitted it. Anytime anybody tells me I have to change, I kind of get defensive about it, but some of the things that I, I mean obviously this end-to-end architecture, they're in a position in theory anyway to do that. They, what choice do they have? A couple of things that struck me is they've got a new consumption model, the SAAS-based consumption model. They also have four validated designs for OT, for IoT apps which that's good to see some actual meat on that bone. They got like utility substations and mining operations and fleet management. I mean it's stuff that you wouldn't traditionally think about coming from a data center company. So they're making some moves that I think are substantive and necessary. >> Well I took some notes here. I wanted to get your commentary on this, guys 'cause to me this is the core news here is that Cisco is truly trying to put that end to end architecture from across domains. You're seeing their core data center business continue to be robust. That's their bread and butter. You've got the edge that's developing nicely with IoT and Enterprise Edge and other places around campus and then you've got multiclass so you've got the three-legged stool. Core data center, multicloud and Edge. Does this address the industry's demand for apps changing, workloads being distributed and then management across these multiple domains or a multicloud because you've got to manage this stuff. So cost to ownership, these are now the table stakes. Your thoughts on those three areas too. Core data center, multicloud and edge. >> Yeah I mean we've been talking about for the last year, the move from hardware to software is not an easy one. There are things that you need to change for their product. They need to change how their field handles it, compensation and how they support their channel is super challenging. At VMWorld last year, we really highlighted how that intercloud networking, what a critical piece it was. I was so excited that the original vision of what Nicira had for pre-acquisitions was starting to come out there because VMWare's coming after Cisco in that manner. Cisco, not like they're trying to create hypervisors. They're going to live in all those worlds, but there definitely is some conflict there and something I always look at, Cisco's got a giant ecosystem. They have hundreds of thousands of certified Cisco engineers and they've got a great ecosystem here. >> Very strong channel. >> Everybody in a strong channel, right. They go to market partners as well as the technology partners and they're still strong. We're going to have on this week a lot of those players here, but that change is something that is tough to go through and it's this journey that they're on. >> Well this, Dave brought up consumption. I want to dig into the consumption piece because how people consume the cloud obviously means they got to stand up to cloud too, multicloud. Cisco's clearly got Azure AWS and Google Cloud. Google seems to be a strategic partner as well as Amazon Azure but I think Google kind of feels like there's more strategic alliances there. I'm just speculating from my opinion, but if I'm a Cisco customer, it's pretty easy now to go multicloud. I don't need to do a lot differently. The question is how do I manage it, what's the cost, how do I consume it? This is going to be critical. Your thoughts. >> Well Cisco's claiming they're going to abstract that complexity and whatever APIs and software infrastructure or infrastructure of a service that they're using, they're going to make that, simplify that and allow you to have a single management console. So as I said before, they're coming at it from a networking perspective. Vmware is coming at it from the traditional hypervisor and trying to elbow its way into the networking and storage space and then as I said, you've got other companies like IBM and Red Hat now coming at it from the application space and Kubernetes is obviously an important role there. I think personally the networking is a right place, a good place to come from. The problem for customers is still going to be complexity 'cause the cloud providers are going to have their own management framework. Obviously vSphere is a big player here. Now you got Cisco at all and then a bunch of startups saying hey ours is even better. >> Well the IBM Red Hat combination. >> Right and so I don't foresee a day where you're going to have one single painted glass. We never had in this industry. It's always been Nirvana and so then it comes down to Cisco getting its fair share. I think Cisco's in a very good position to get its fair share for the reasons that Stu just mentioned. >> Stu, so I want to get your thoughts. We're in the DevNet Zone. That's where theCUBE is. It's our second year at Cisco Live! We'll be at the American show again this year. It's on the schedule, but the role of the developer, the role of infrastructure as code now is in place actually happening within Cisco's customer base. So if you're a Cisco customer, you're looking at this saying okay, I've been running the Cisco network services. What is the role of the network engineer? Is there a renaissance coming? We said this last year. I kind of see it happening here. The network is now the computer. The network is the data. This is a great opportunity for Cisco. Your thoughts on the culture of the Cisco customer base and that vibe of infrastructure's code. >> Yeah so John, I used to bristle a little bit when you said well we're going to turn all the network engineers and they're going to become coders and I said well I know a lot of network engineers and some of them love and thrive that, but a lot of them, they're in the CLI, they're doing their thing. If you go and walk around this DevNet zone, a lot of stuff that's happening isn't networking. They are builders. This reminds me of going into AWS ReInvent and talking about people here the tools and the skills that you need to have to be a builder and absolutely networking is a part of it, that managing orchestration security, all things that touch into the network, but it's not oh how do I manage my network switch better, which is kind of the hardware focused view and maybe code this, but it really is how am I building APIs, how am I leveraging things? I've got IO key demos out there and networking is in there, but it's not necessarily the thing and so therefore you got the wave of developers and builders and John, we know that's the future. You need to be a builder. How can you create faster? Things like server list or moving in that direction where I don't need, it's less about the coding, it's more about my application, my data and my building. >> You bring up a great point, Stu, and this is something that I always point to when I look at who's kind of bsing the marketplace in terms of speeds and fees and announcements. When you see people actually coding and being enabled to create value, you start to see that's a good signal and here in the DevNet Zone, I saw four or five demos that were writing software and apps taking advantage of the hardware, taking advantage of the network. So now the network is enabling through APIs to extend the data. This is kind of changing the concept of how packages are moved around the networks. So this is truly a tell sign in my opinion of the modern infrastructure. The question is, Dave, how fast will the customers migrate to being true devops or infrastructure as code customers writing apps, building new things, create that value? >> Well I would say this. Of all the sort of traditional large-scale, call them whatever, legacy enterprise data center companies, I think Cisco's the only one that I can really point to that has kind of got developers right. IBM, Blue Mix, StartStop, remember the EMC code initiative that was kind of a joke? And so Oracle owns Java and it still sort of struggles with developers so I think Cisco got it right and I think the reason they got it right is because they're focused. That's what I do like about Cisco's strategy and the reason why you obviously give them a high chance is because they're really focused on that networking piece. They're not trying to be all things to all people even though you can forecast that they're sort of headed in that direction, but they're starting from a position of strength. >> You made a good point. The success or failure of developer programs is about creating an environment where it's compatible with how their expectations are. Microservices containers, these abstraction layers that they're used to dealing with create value. Developers love that. The other thing I would say is that developers look at what they can do, the world's changed. It used to be that the network used to dictate what can happen to applications. Now applications need to program the network. I think this was a shift we saw with DevNet Create and DevNet two years ago where they started moving from the command line interface to more of a software abstractions or application interfaces where they say hey let's just do more with the network. So applications now require programmability. This is the shift, it's upside down from what it was when the industry started. So this new bridge has to be application-centric and to me that's what I get out of the cloud announcement around multicloud. You're starting to see the portfolio up and down their stack. From security they got stealthwatch tetration, that's SAAS, analytics, app dynamics among other things. Data Center, HyperFlex, UCS Nexus all lined up. Cloud-centric container platforms on multiple clouds, IoT nedic, V Edge, Meraki, cloud services router. This is now a portfolio. They've got the products, Stu. >> Absolutely, John. >> Okay guys we're going to have a great day. Three days of wall-to-wall coverage. We're kicking it off here in Barcelona. Stay with us for more coverage here at Cisco Live! This is theCUBE. We'll be right back. (energetic music)

(upbeat music) >> Live from Barcelona, Spain it's theCUBE, covering the Cisco Live! Europe. Brought to you by Cisco, and its ecosystem partners. >> Welcome to theCUBE, we're here in Barcelona. Welcome to theCUBE live here in Barcelona for Cisco Live! 2019. Cisco Live! Europe. I'm John Furrier with my hosts this week Stu Miniman, Dave Vellante breaking down all the action. Keynotes over. Three days of wall-to-wall coverage, guys, Cisco Live! Introducing some new innovations, Stu and Dave, around reinventing networking. Couple key themes big announcements around ACI, anywhere application-centric, infrastructure, HyperFlex and the new CloudCenter Suite where they're doubling down on Cloud, redefining the network. Stu, we've been here last year. We've been watching Cisco. Policy-based, intent-based networking, Cisco's tying it all together with new branding, The Bridge to Tomorrow, your thoughts. >> Yeah John, I actually, I like some of the new branding The Bridge to Tomorrow, I've been critical of Cisco. Cisco always said, oh well networking's everywhere and it's really important, and it's like, well okay but where's the meat? Where's the detail behind this? They've done a number of acquisitions in the space. They're making sure that they understand where they are. And they had some failures along the way. I mean, call a spade a spade, John, they are going to be a leader in multi-cloud is where they want to be, but, they had some falters along in being a public cloud. The inter-cloud message that they had, they confused the service providers, they didn't understand how they played with they hyper-scale players and now they're understanding where they sit, S.D. Wayne critically important, where they live in the data center and it's interesting we talk about the, do we talk about the data center? Or do we care where the data is centered? And of course that is not in one place but it is many places. We know customers today live in a multi-cloud word, how I get to my data how I leverage my data is critically important and the networking and management is something that is critical across all those so right, as you said, ACI and HyperFlex, the CloudCenter suite I know is an area we're going to dig into a bunch this week Because Cisco has an opportunity to play across these environments, but, Cisco has been trying for a long time to be the manager of managers in these environments, I mean, I think back to things Dave Vellante and the Wikibon team and I have done for years talking about, how do you manage this heterogeneous world and it's just, instead of multi-vendor, we're now talking multi-cloud. >> And you know what, everything is coming together, Dave, we've been covering Cisco we're looking at the timing of the positioning it's seems to be coming together, and around the re-branding, which by the way, I agree with Stu, I like it. The bridge to tomorrow, it resinates with me maybe because I'm from the Bay Area but, the bridging two worlds, a bridging on premises and cloud together in a very seamless way and an elegant way architecturally, so the branding ties in with really much a rounding out of the portfolio so a lot of story lines to follow the new branding, Chuck Robbins getting his sea legs now as Cisco goes to the next level And clearly they see multi-cloud as their positioning because this has been Cisco's core positioning for many, many years this idea of enabling other people to do innovation whether its applications and work loads now they're connecting two worlds Your thoughts on the timing and their position vis-a-vis industry. >> Well Cisco talked this morning in the keynote about another bridge on one side of the network is users and devices and the other side of the network are application and data and we've talked for years about how the network is flattening and traffic is going east-west etc. But, inter-clouding, if you will, puts increased pressure on that and that is clearly Cisco's strategy to be the best at connecting whether its on prim and public clouds and between public clouds. Cisco's got to make the case that on our networks, you're going to be higher performance and more secure. And that's certainly what they are implying. They're also making a big transition from being a hardware company to a software company. When you listen to VMware, they talk about Cisco they talk about oh they make the best hardware, the best switches and Cisco's like no. They're talking software capabilities across the network, new architectures, reinventing, coming at it from the network, which is obviously their strong point and it just really sets up an interesting competitive dynamic between Cisco, certainly VMware who's trying to do to networking and storage what it did to servers, and know you've got IBM and Red Hat coming at it from applications, and the development perspective. We're here in the DevNet zone and I think that's the other piece of the announcements that we're hearing today is developers can actually program with things like IoT, and new use cases, so pretty exciting times. >> Stu, story lines around the data center you made a comment that was kind of a play on words on the key note, data is centered, so center dash ed, center-ed, so the data center concept is moving into data being center of the value proposition. This has been interesting because if you look at what DevNet has spawned and DevNet created under Susie Wee's leadership you saw the role of API's. So if data moves around the network and that's the core competency of Cisco moving packets from point A to point B Adding automation, adding intelligence, with intent based networking and cloud enabling on the other side, you got to have access to the data, the data's got to be traversing and interoperating with multiple environments. This is now a architectural standard. Is Cisco, from a product portfolio stand point whether it's security, analytics, cloud app management, IoT, networking, does it all come together? Your thoughts? >> Yeah, so, first of all, Cisco plays in a lot of these environments. We talked not just data center, but, when you talk about branch office something Cisco has been doing for a really long time, and how do I network between all of those remote applications and my central location, and my central location might not be the data center, it might be a or multiple public clouds out there. So Cisco's been attacking this back when optimization many years ago. SD-Wan really has taken that and much more you know, super important when we talk about this multi-cloud environment and how I get that connectivity so they're there and Cisco from the ground up has gone through a lot of rebuild. So, the CloudCenter suite that we talk about, Microservice's architecture built with Kubernetes into that API economy that we're talking about which is a lot about what we talk about here in the DevNet zone. So, absolutely, Cisco has, they're known as space, they have a lot of the skills, they have a very broad platform of products out there. David Goeckeler this morning, he's just reeling off all the different areas they play to and saying, we've got like 6,000 people in the opening keynote, and he's like, I came and looked at this room, and I've got like four x the amount of engineers working on your networking security issues that were here. It's like 24,000 people it's an army, there's very few companies outside of Google, Amazon and Microsoft, that can call on that engineering strength and that's just the internal piece what we love, we talked to Susie Wee and she's like, we've got 500,000 on our community platform helping to build, IT, OT, IoT, all the network, all the security pieces so, Cisco is not new to a lot of these but, is re-focused on a lot of what they are doing. >> So the big news obviously is the ACI anywhere in hyperfex anywhere and putting the data center, connecting those two worlds and you got the cloud as well so the role of hyper-convergence is certainly key in this announcements here today. ACI application center infrastructure just code words for policy based, intent-based networking, all the stuff that Cisco's used to doing. Then when you connect to the cloud, you got data center, on premises, cloud, and then hyper-convergence at the edge. This is the core, right, they got the edge, multiple environments, you got cloud, and you got the data center, legacy environment which is evolving, Those are all coming together, Stu. This is cross-domain challenge. Is Cisco prepared? David I'd love to get your comments on this as well, to be that cross-domain vendor? Because multi-cloud truly will require data to be moving around, policies to be automated and deployed across domains. This is a huge challenge. >> Yeah, I mean, John, it is challenging, and if you look at the hyper-convergence infrastructure space, where Cisco plays with HyperFlex goes up against VMware vSAN, Nutanix and the rest there, the people that sell that and build that, are necessarily the ones that really understand multi-cloud. We've seen that space maturing for the last couple of years. Obviously Cisco's got a right to be at the table there and they're moving in that direction, but, to the data center folks, and they are data center folks that have done networking and storage and all that, are they getting trained up and and helping to help bridge to that multi-cloud environment? I think there's still a lot of work to go and I talked to the channel, when I talked to the people who are out there going to market on that. >> Well that's the big challenge, is how do you move the base, how do you get them from point A to point B without, spending a billion dollars? You heard Gordon today stand up there and say, you got to change. Now, and he admitted, anytime somebody tells me I have to change, I kind of get defensive about it. But some of the things that I. Well obviously this end-to-end architecture, they're in a position, in theory anyway to do that, what choice do they have? A couple of things that struck me is they've got a new consumption model, SaaS-based consumption model, they also announced four validated designs for OT from IoT apps. It's good to see some actually meat on that bone. You got like utility sub-stations and mining operations and fleet management, I mean, it's stuff that you would'nt traditionally think about from coming from a data center company. So they're making some moves that I think are substantive and necessary. >> Well I took some notes down I wanted to get your comments on this guys, cause, to me, this is the core news here, is that Cisco is truly trying to put that end-to-end architecture around cross-domains, you seeing their core data center business continue to be robust, that's they're bread and butter. You got the Edge that's developing nicely with IoT and Enterprise Edge and other places around campus. Then you got multi-cloud, so you got the three-legged stool. Core data center, multi-cloud, and Edge. Does this address the industries demand for apps changing, work loads being distributed, and then, management across these multiple domains or multi-cloud, because you got to manage this stuff. So cost to ownership, these are now the table stakes, your thoughts on those three areas, Stu, core data center, multi-cloud, and Edge? >> Yeah, I mean we've been talking about for the last year, the move from hardware to software is not an easy one. There are things that you need to change for product that you need to change how their field handles it, the whole. The compensation and how they support their channel, is super challenging. At VMworld last year, we really highlighted how that inter-cloud networking, what a critical piece it was. I was so excited, that the original vision of what Nicira had pre-acquisition was starting to come out there, because VMware's coming after Cisco in that manner. Cisco, not like they're trying to create high providers, they are going to live in all those worlds, but, there definitely is some conflict there and something I always look at, Cisco's got a gigantic ecosystem. They have, hundreds of thousands of certified Cisco engineers and they've got a great ecosystem here. >> And a strong channel. >> And a strong channel. Right, that go to market, partners as well as the technology partners, and they're still strong. We're going to have on this week a lot of those players here, but, that change is something that is tough to go through, and, it's this journey that they're on. >> Well, this, Dave brought up to consumption, I want to dig into the consumption piece because how people consume the cloud obviously means that they got to stand up the cloud, multi-cloud. Cisco's clearly got Azure AWS and Google Cloud. Google seems to be a strategic partner as well as Amazon, Azure, but I think Google, kind of feels like this more strategic alliance there, I'm just speculating from my opinion, but, if I'm a Cisco customer, it's pretty easy now to go multi-cloud, I don't need to a lot of things differently. The question is, how do I manage it, what's the cost, and how do I consume it? This is going to be critical. Your thoughts? >> Well, so, Cisco's claiming they're going to extract that complexity, and whatever API's and software infrastructure, infrastructure's a service that your using, they're going to make that simple, simplify that and allow you to have a, single management console. So that, I said before, they're coming at it from a networking perspective, VMware is coming at it from the traditional hypervisor and trying to elbow its way into the networking against storage space and as I said, you got other companies like IBM and Red Hat now coming at it from the application space and Kubernetes is obviously an important role there. I think personally, I think that networking is a right place, a good place to come from. The problem for customers is still going to be complexity. Because the cloud providers are going to have their own, management framework obviously, vSphere is a big player here and now you got Cisco at all, and a bunch of start-ups saying hey, ours are even better. >> Well in the IBM, Red Hat accommodation. >> Right, so I don't foresee a day where your going to have one single painted glass, we've never had in this industry, it's always been nirvana, and so, then comes down to Cisco getting its fair share. I think Cisco's in a very good position to get its fair share for the reasons that Stu just mentioned. >> Stu, so I want to get your thoughts we're in the DevNet zone, that's where theCUBE is. It's our second year at Cisco Live! We'll be at the North America show again this year, it's on the schedule, but the role of the developer, the role of infrastructure as code now is in place, actually happening within Cisco's customer base. So if your a Cisco customer, you're looking at this saying, okay, I've been running the Cisco network, I've got all the portfolios, services, what is the role of the network engineer? Is there a renaissance coming? We've said this last year, I kind of see it happening here, the network is now the computer, the network is the data. This is a great opportunity for Cisco. Your thoughts on the culture of the Cisco customer base and that vibe of infrastructure as code? >> Yeah, so, John, I used to bristle a little bit, when you said, well, we're going to turn all the network engineers and they're going to become coders, and I said, well, I know a lot of network engineers and some of them love and thrive that, but, a lot of them, they're in the CLI, they're doing their thing. If you walk around this DevNet zone, a lot of the stuff that happening isn't networking. They are builders. This reminds me of going to AWS Reinvent, taking about people here, the tools, the skills you need to have to be a builder. And absolutely, networking is a part of it, that management, orchestration, security, all the things that touch into the network, but it's not, oh how do I manage my network switch better? Which was kind of the hardware focus view, and maybe code this, but, it really is, how am I building API's, how am I leveraging things, I've got IoT demos out there and it's networking is in there, but, it's not necessarily the thing, and, so therefore, you've got this wave of developers and builders and, John, we know that's the future, you need to be a builder, how can you create faster, things like server lists, or moving in that direction where I don't need, it's less about the coding, it's more about my application, my data and my building. >> You bring up a great point, Stu, and this is something that I always, I point to when I look at who's kind of BSing the market place in terms of speeds and feeds, and announcements. When you see people actually coding and being enabled to do some creative value, you start to see that's a good signal, and here in the DevNet zone, I saw four-five demos that were writing software apps, to take advantage of the hardware, to take advantage of the network, so know the network is enabling through APIs to extend the data. This is kind of changing the the concept of how packets will move around the networks, so this is truly a tell sign, that in my opinion, of the modern infrastructure. The question is, Dave, how fast will the customers migrate to being true devops or infrastructure as code customers, writing apps, building new things, to create that value? >> Well, I would say this, that of all the sort of traditional large scale call them, whatever, legacy, enterprise, data center companies, I think Cisco is the only one that I can really point to that has kind of got developers right. I mean IBM, Bluemix, StartStop, remember the EMC Code initiative, that was kind of a joke, and so, Oracle owns Java, and it still sort of struggles with developers, so, I think Cisco got it right, and I think the reason they got it right is cause they're focused. I mean that's what I do like about Cisco's strategy and the reason why, you, know, obviously you give them high chances, it's because they're really focused on that networking piece. They're not trying to be all things to all people, even though you forecasted they're kind of heading in that direction, but they're still starting from a position of strength. >> Well, you made a good point. The success and failure of developer programs is about creating an environment where it's compatible with how they're expectations are. Microservices, containers, these abstraction layers that they're used to dealing with create value. Developers will love that. The other thing I would say is is that as developers look at what they can do, the worlds changed. It used to be the network that used to dictate what can happen to applications, now applications need to program the network. I think this was a shift we saw with DevNet Create and DevNet two years ago, where they started moving from the command line interface to more software abstractions or applications interfaces where, say hey, lets just do more with the network, so applications now require program ability. This is the shift, it's upside down from what it was when the industry started, so this new bridge has to be application-centric and to me, that's what I get out of the cloud announcement around multi-cloud. You're starting to see to see the portfolio up and down their stack, from security, they got stealthwatch tetration, that's, SaaS, analytics, app dynamics, among other things data center, HyperFlex, UCS, Nexus, all lined up. CloudCenter, container platform, on multiple clouds, IoT, Kinetic, Vedge, cloud services router, this is now a portfolio. They got the products too. >> Absolutely, John. >> Okay guys, we're going to have a great day, three days of wall-to-wall coverage kicking off here in Barcelona, stay with us for more coverage here at Cisco live, it's theCUBE. We'll be right back. (upbeat music)

(dramatic music) >> Hey, welcome back, everybody. Jeff Frick here with theCUBE. We are in our Palo Alto studios having a CUBEConversation. We have a itty-bitty little break in the middle of this crazy conference season. Next week, we're back on the road. And one of the places we're going is UiPath Forward Americas. It's our first time to the UiPath user conference. They're all about the RPA, robotic process automation, which is a super hot space and we're really excited to have with us today Carl Eschenbach. He's a partner at Sequoia Capital, who just came in on UiPath's latest round of funding. Which was pretty significant. You can read all about it in the papers as they say. So we're excited to have Carl here. Carl, great to see you again. >> Great to be here. Thanks for having me, Jeff. >> Absolutely, so we of course known you for years and years and years, you had a long, illustrious career at VMware. You've been in the VC world at Sequoia for a couple of years. How are you liking the transition to VC? >> I really enjoyed it. I had a great many year run, almost 15 years at VMware. I was thankful for it, but the transition to Sequoia, I don't think it could have gone any better. I've really enjoyed it and to be working at Sequoia, which is a tremendous platform behind you, with 45 years of rich history, is just a privilege. And leveraging my operating experience of 29 years, now putting it to work through the Sequoia brand, has been pretty exciting for me. I'm very thankful. >> It's been a pretty good run for former VMware guys, in VC. You know, Jerry Chen is on all the time, from Greylock. There's a number of you guys out there. >> Yeah, there's a number. I think Jerry, I think Steve Herrod's now. You know, Martin Casado who was the founder of Nicira, that we bought at VMware was at VC, so there's a bunch of people who have proliferated the VC market, but none of them got the opportunity to be at Sequoia like I did. So I feel very privileged. >> And it really points to the opportunity, the continue innovation opportunity in the enterprise space. 'Cause you're not investing in dating apps, or autonomous vehicles, maybe autonomous vehicles, I don't know, but it's really more the enterprise opportunity continues to be rich with new, kind of transformative opportunities. >> Yeah I think that's right. I spend the majority of my time, as you could imagine, in the enterprise, that's where I grew up, and my operating experience is all in the enterprise deep infrastructure, so I leverage that experience here at Sequoia, focusing on the enterprise. Both infrastructure, hardware, software, public, private cloud, SaaS. So anything associated with offerings in the enterprise, is where I focus and I'll tell you, over the last few years it's been a really rich environment for an investor to think about what's happening in the enterprise as people still are looking for technologies to transform their business at such a rapid rate. Both on premise and obviously with the cloud environment, it's not if, it's when and how fast people ultimately move into the cloud. >> Right, it fascinates me how we continue to uncover these huge buckets of inefficiency. I mean, you think, I used to tease my friends at a center, tease them that you guys wrang all the fat out of the supply chain, now everything's on back order all the time. >> Yeah. >> But we still find huge chunks of inefficiency, and huge opportunities to get more value out, which is I think, one of the fundamental differences in this kind of stock round up and this productivity. It's real, it's not just smoke and mirrors, there are huge still opportunities. >> Yeah, no I agree, I mean, listen, there are huge opportunities to drive gains and productivity. One of the things we're going to talk about is RPA, for example. How do you automate your enterprise to move towards a digitized world? And by doing that you become more automated, which just drives your productivity, your people that much higher, so I think with the ever increasing use of AI and machine learning, getting deeper, deeper integrated into enterprise solutions. It makes things that much more automated, which impacts the productivity of your people, which hopefully has great returns on both your top line growth and bottom line savings. >> Right, so let's dig into that, 'cause business process automation has been around for a long time. I was teasing about a center, you know you bring 'em in and they spend a lot of time, and they map a bunch of stuff out and they change a lot of things. RPA, robotic process automation, which is a relatively new term, I didn't hear about it 'til relatively recently, is a very different approach to automation, than just hiring in all the consultants. It's about actually letting machines learn, listen, and start to build those new processes. >> Yeah, if you think about the BPO world, BPO was still and is still a very manual human intensive activity. To your point, you're bringing on all these people. You do an outsource and then but there's still someone there, you know, doing data entry, and doing very mundane, kind of easy work. But it's all human driven. And people used to try to solve this by going to offshore locations, with lower cost opportunities, where you can get a workforce that's much cheaper, than here in the states. But again it was all human driven. Now with the advent of something like RPA, that can be substituted with software, and software bots or robots. And by doing that it just drives up the efficiency at which you're doing everything in your older system. So, that's why we've seen such a rapid acceleration that you can't ignore around RPA. Just over the last couple of years this has accelerated extremely quickly, the technology's become a lot more mature, people are starting to implement it, it's one of the first instantiations of AI in the enterprise. And if you think about it, Jeff, implementing a software bot that may replace, three, four, five humans. And oh, by the way, the bot can work 24 hours a day. Oh, by the way, the accuracy rate of the bot is probably significantly higher than a human, so the ROI and the value proposition around RPA is very straightforward. You can't ignore the value it brings. And everyone as you know is always looking to save cost, but it does more than just save cost. It actually starts to impact your top line revenue growth. Because you can take those humans, who used to do those mundane tasks, and you can repurpose them to work on, if you will, revenue generating, profitable activities, while the software bots take care of all the automation of your older legacy systems. >> Right, and it's even, not even, its little things. I'm never amazed, right? I do a ton of interviews, we talk about automation all of the time. I still do a whole lot of manual stuff, that I would much rather have my robotic assistant help me do, simple things like you know, make sure that we get the picture out from this interview, you know, after the fact. All these little mundane tasks that the sum total of which are a lot of activity, and then as you said, I think the other really important piece is the accuracy, right? When you, unfortunately, with computers, unfortunately, they only like to do it the way they get set up to do it. They're not really good at errors so much, so once you set it up. But you know, this RPA is different in that the people aren't doing it, they're actually letting the robots do it so VMware early days of virtualization, now we're getting to the point where the compute, the store, and the network are to a point where you get the horsepower to support this type of function. >> Yes. >> I didn't have it in the past. >> Yep, yeah and with RPA, I think, one of the things that's pretty neat, is people are starting to implement RPA, and they're always finding new use cases for it. And once they get some experience in programming these software bots, right, they start to realize well maybe we can implement this in this other area. So it may start in a finance organization, and it may move into, you know, automating cost centers, or automating what you're doing in sales, or sales operations, so there's many opportunities, once it's implemented once to find other use cases. And actually, you're starting to see people become software bot developers. Like they have to set up these bots to implement 'em in their environment. So people have to learn how to program these bots, and then implement 'em. So there's an ecosystem that's starting to be established around the RPA industry. You mentioned some of the Accentures of the world, they're the old BPOs. There's some of the biggest customers of people like UiPath because what they do is they say, wow, today we're solving this with humans, but if I could solve this now with software, in RPA and technology, like UiPath is providing, I can drive up my margins because I'm doing it through the use of software. And I can repurpose those people to do other tasks. >> Right, so great point. You brought UiPath, and that's what we started with. What did you see as an investor, as an executive in UiPath both the technology and the team and their execution, that led you guys to go in on this big round? >> Yeah so we did a pretty deep dive across the entire RPA landscape. Listen, you couldn't ignore the momentum, right? We say don't fight gravity. We saw the momentum of the RPA market accelerating, and the way I like to describe it, it went from a push market where people have to push their technology into the enterprise, to now it's a pull market where the enterprise is pulling the technology in. Now they're looking for the best solution. So we recognized the growth in the RPA market, to your point, just in the last two or three years, it's really accelerated. And then as we looked at the landscape, we had the opportunity to spend time with Daniel, the co-founder and CEO, and I think there was a few things that stood to us around UiPath. Number one, Daniel is a very unique founder. He's been at this for years and his level of perseverance and commitment to make this a very successful company is unwavering. The fact that they're global in nature already, this is a company who started in Bucharest, expanded internationally and expanded to the US simultaneously so they're covering the three major geographies around the world already today even at an early stage of the company. Which is very, very important for someone when you're an investor to say, wow, what's your global footprint? So we had to help them get into these markets. Today they're established around the world. >> They're already there. >> They're in Japan. They're across Europe, because of where they originated. They have a new headquarters in New York, and they're hiring rapidly. The second is we think their technology that exists today in the roadmap, where they're going in the future, was very powerful. And they're going to continue to implement more and more, if you will, AI into their platform. The other thing that we were impressed with was the fact that they are customer focused. They're very customer centric. And they built a global footprint to support their global customers, and they've had to do that because of the rapid acceleration of the product. They think they're getting like six new enterprise customers a day. >> Wow >> On the UiPath platform. And if you're going to do that in a global footprint, you have to have support around the world. And they're maniacal about how they support their customers. So all of this led to us looking at the market, recognizing the RPA growth and saying, UiPath is the company we want to bet on and we couldn't be more excited to be part of the company, and to help them on their journey as they continue to grow. >> Yeah, well we're excited to go to our first UiPath Americas Forward, Forward America, I got it right. Yeah, we'll be there next week, it's in the Fontainebleau hotel in Miami. And we're looking forward, 'cause like you said, it seemed to come out of nowhere. But as typically is the case, right? Always an overnight success, 10 years in the making, we're just late to see. >> Yeah, they have conferences they've been doing around the world, Jeff, UiPath. And every conference they do, including Japan, it's like a standing room only, because there is so much interest in this technology, and again I think anything associated with automating your infrastructure, moving to a new digitalized world, and everyone has a digital strategy first kind of mentality in the enterprise, these people fit right in, smack in the middle of that. >> Yeah, well, clearly the valuation speaks to that, as market validation. >> Yeah. >> So no doubt about it, Well Carl, thanks for taking a few minutes out of your busy day. Glad to hear the VC life is treating you well. >> Well, thanks for having me. It's good to see you guys again back here on theCUBE. It's always fun spending time with you, and thanks for your interest in UiPath and RPA. I think it's a really exciting market, and I'm quite confident we'll continue to accelerate at unprecedented rates. >> Alright, well great. Well, thanks a lot Carl. He's Carl, I'm Jeff. You're watching theCUBE. We're having a CUBEConversation at our Palo Alto studio. Taking a break from the conference season, but we'll be heading back on the road soon. Thanks for watching. >> Thank you. (dramatic music)

(dramatic music) >> Hey, welcome back, everybody. Jeff Frick here with theCUBE. We are in our Palo Alto studios having a CUBEConversation. We have a itty bitty little break in the middle of this crazy conference season. Next week, we're back on the road. And one of the places we're going is UiPath Forward Americas. It's our first time to the UiPath user conference. They're all about the RPA, robotic process automation, which is a super hot space and we're really excited to have with us today Carl Eschenbach. He's a partner at Sequoia Capital, who just came in on UiPath's latest round of funding. Which was pretty significant. You can read all about it in the papers as they say. So we're excited to have Carl here. Carl, great to see you again. >> Great to be here. Thanks for having me, Jeff. >> Absolutely, so we of course known you for years and years and years, you had a long, illustrious career at VMware. You've been in the VC world at Sequoia for a couple of years. How are you liking the transition to VC? >> I really enjoyed it. I had a great many year run, almost 15 years at VMware. I was thankful for it, but the transition to Sequoia, I don't think it could have gone any better. I've really enjoyed it and to be working at Sequoia, which is a tremendous platform behind you, with 45 years of rich history, is just a privilege. And leveraging my operating experience of 29 years, now putting it to work through the Sequoia brand, has been pretty exciting for me. I'm very thankful. >> It's been a pretty good run for former VMware guys, in VC. You know, Jerry Chen is on all the time, from Greylock. There's a number of you guys out there. >> Yeah, there's a number. I think Jerry, I think Steve Herrod's now. You know, Martin Casado who was the founder of Nicira, that we bought at VMware was at VC, so there's a bunch of people who have proliferated the VC market, but none of them got the opportunity to be at Sequoia like I did. So I feel very privileged. >> And it really points to the opportunity, the continue innovation opportunity in the enterprise space. 'Cause you're not investing in dating apps, or autonomous vehicles, maybe autonomous vehicles, I don't know, but it's really more the enterprise opportunity continues to be rich with new, kind of transformative opportunities. >> Yeah I think that's right. I spend the majority of my time, as you could imagine, in the enterprise, that's where I grew up, and my operating experience is all in the enterprise deep infrastructure, so I leverage that experience here at Sequoia, focusing on the enterprise. Both infrastructure, hardware, software, public, private cloud, SaaS. So anything associated with offerings in the enterprise, is where I focus and I'll tell you, over the last few years it's been a really rich environment for an investor to think about what's happening in the enterprise as people still are looking for technologies to transform their business at such a rapid rate. Both on premise and obviously with the cloud environment, it's not if, it's when and how fast people ultimately move into the cloud. >> Right, it fascinates me how we continue to uncover these huge buckets of inefficiency. I mean, you think, I used to tease my friends at a center, tease them that you guys wrang all the fat out of the supply chain, now everything's on back order all the time. >> Yeah. >> But we still find huge chunks of inefficiency, and huge opportunities to get more value out, which is I think, one of the fundamental differences in this kind of stock round up and this productivity. It's real, it's not just smoke and mirrors, there are huge still opportunities. >> Yeah, no I agree, I mean, listen, there are huge opportunities to drive gains and productivity. One of the things we're going to talk about is RPA, for example. How do you automate your enterprise to move towards a digitized world? And by doing that you become more automated, which just drives your productivity, your people that much higher, so I think with the ever increasing use of AI and machine learning, getting deeper, deeper integrated into enterprise solutions. It makes things that much more automated, which impacts the productivity of your people, which hopefully has great returns on both your top line growth and bottom line savings. >> Right, so let's dig into that, 'cause business process automation has been around for a long time. I was teasing about a center, you know you bring 'em in and they spend a lot of time, and they map a bunch of stuff out and they change a lot of things. RPA, robotic process automation, which is a relatively new term, I didn't hear about it 'til relatively recently, is a very different approach to automation, than just hiring in all the consultants. It's about actually letting machines learn, listen, and start to build those new processes. >> Yeah, if you think about the BPO world, BPO was still and is still a very manual human intensive activity. To your point, you're bringing on all these people. You do an outsource and then but there's still someone there, you know, doing data entry, and doing very mundane, kind of easy work. But it's all human driven. And people used to try to solve this by going to offshore locations, with lower cost opportunities, where you can get a workforce that's much cheaper, than here in the states. But again it was all human driven. Now with the advent of something like RPA, that can be substituted with software, and software bots or robots. And by doing that it just drives up the efficiency at which you're doing everything in your older system. So, that's why we've seen such a rapid acceleration that you can't ignore around RPA. Just over the last couple of years this has accelerated extremely quickly, the technology's become a lot more mature, people are starting to implement it, it's one of the first instantiations of AI in the enterprise. And if you think about it, Jeff, implementing a software bot that may replace, three, four, five humans. And oh, by the way, the bot can work 24 hours a day. Oh, by the way, the accuracy rate of the bot is probably significantly higher than a human, so the ROI and the value proposition around RPA is very straightforward. You can't ignore the value it brings. And everyone as you know is always looking to save cost, but it does more than just save cost. It actually starts to impact your top line revenue growth. Because you can take those humans, who used to do those mundane tasks, and you can repurpose them to work on, if you will, revenue generating, profitable activities, while the software bots take care of all the automation of your older legacy systems. >> Right, and it's even, not even, its little things. I'm never amazed, right? I do a ton of interviews, we talk about automation all of the time. I still do a whole lot of manual stuff, that I would much rather have my robotic assistant help me do, simple things like you know, make sure that we get the picture out from this interview, you know, after the fact. All these little mundane tasks that the sum total of which are a lot of activity, and then as you said, I think the other really important piece is the accuracy, right? When you, unfortunately, with computers, unfortunately, they only like to do it the way they get set up to do it. They're not really good at errors so much, so once you set it up. But you know, this RPA is different in that the people aren't doing it, they're actually letting the robots do it so VMware early days of virtualization, now we're getting to the point where the compute, the store, and the network are to a point where you get the horsepower to support this type of function. >> Yes. >> I didn't have it in the past. >> Yep, yeah and with RPA, I think, one of the things that's pretty neat, is people are starting to implement RPA, and they're always finding new use cases for it. And once they get some experience in programming these software bots, right, they start to realize well maybe we can implement this in this other area. So it may start in a finance organization, and it may move into, you know, automating cost centers, or automating what you're doing in sales, or sales operations, so there's many opportunities, once it's implemented once to find other use cases. And actually, you're starting to see people become software bot developers. Like they have to set up these bots to implement 'em in their environment. So people have to learn how to program these bots, and then implement 'em. So there's an ecosystem that's starting to be established around the RPA industry. You mentioned some of the Accentures of the world, they're the old BPOs. There's some of the biggest customers of people like UiPath because what they do is they say, wow, today we're solving this with humans, but if I could solve this now with software, in RPA and technology, like UiPath is providing, I can drive up my margins because I'm doing it through the use of software. And I can repurpose those people to do other tasks. >> Right, so great point. You brought UiPath, and that's what we started with. What did you see as an investor, as an executive in UiPath both the technology and the team and their execution, that led you guys to go in on this big round? >> Yeah so we did a pretty deep dive across the entire RPA landscape. Listen, you couldn't ignore the momentum, right? We say don't fight gravity. We saw the momentum of the RPA market accelerating, and the way I like to describe it, it went from a push market where people have to push their technology into the enterprise, to now it's a pull market where the enterprise is pulling the technology in. Now they're looking for the best solution. So we recognized the growth in the RPA market, to your point, just in the last two or three years, it's really accelerated. And then as we looked at the landscape, we had the opportunity to spend time with Daniel, the co-founder and CEO, and I think there was a few things that stood to us around UiPath. Number one, Daniel is a very unique founder. He's been at this for years and his level of perseverance and commitment to make this a very successful company is unwavering. The fact that they're global in nature already, this is a company who started in Bucharest, expanded internationally and expanded to the US simultaneously so they're covering the three major geographies around the world already today even at an early stage of the company. Which is very, very important for someone when you're an investor to say, wow, what's your global footprint? So we had to help them get into these markets. Today they're established around the world. >> They're already there. >> They're in Japan. They're across Europe, because of where they originated. They have a new headquarters in New York, and they're hiring rapidly. The second is we think their technology that exists today in the roadmap, where they're going in the future, was very powerful. And they're going to continue to implement more and more, if you will, AI into their platform. The other thing that we were impressed with was the fact that they are customer focused. They're very customer centric. And they built a global footprint to support their global customers, and they've had to do that because of the rapid acceleration of the product. They think they're getting like six new enterprise customers a day. >> Wow >> On the UiPath platform. And if you're going to do that in a global footprint, you have to have support around the world. And they're maniacal about how they support their customers. So all of this led to us looking at the market, recognizing the RPA growth and saying, UiPath is the company we want to bet on and we couldn't be more excited to be part of the company, and to help them on their journey as they continue to grow. >> Yeah, well we're excited to go to our first UiPath Americas Forward, Forward America, I got it right. Yeah, we'll be there next week, it's in the Fontainebleau hotel in Miami. And we're looking forward, 'cause like you said, it seemed to come out of nowhere. But as typically is the case, right? Always an overnight success, 10 years in the making, we're just late to see. >> Yeah, they have conferences they've been doing around the world, Jeff, UiPath. And every conference they do, including Japan, it's like a standing room only, because there is so much interest in this technology, and again I think anything associated with automating your infrastructure, moving to a new digitalized world, and everyone has a digital strategy first kind of mentality in the enterprise, these people fit right in, smack in the middle of that. >> Yeah, well, clearly the valuation speaks to that, as market validation. >> Yeah. >> So no doubt about it, Well Carl, thanks for taking a few minutes out of your busy day. Glad to hear the VC life is treating you well. >> Well, thanks for having me. It's good to see you guys again back here on theCUBE. It's always fun spending time with you, and thanks for your interest in UiPath and RPA. I think it's a really exciting market, and I'm quite confident we'll continue to accelerate at unprecedented rates. >> Alright, well great. Well, thanks a lot Carl. He's Carl, I'm Jeff. You're watching theCUBE. We're having a CUBEConversation at our Palo Alto studio. Taking a break from the conference season, but we'll be heading back on the road soon. Thanks for watching. >> Thank you. (dramatic music)