>> Narrator: Live from Las Vegas. It's the Cube! Covering VMWorld 2017. Brought to you by VMware and it's ecosystem partners. >> Welcome back everyone. Live in Las Vegas we are here in the VMware Village, VM Village. We're kicking off day two or ending day two wrap up here. It's the Cube, I'm John Furrier with Dave Vellante with our wrap up guests Peter Burris, head of research at Wikibon.com and Stu Miniman co-host of the Cube and analyst of Wikibon. Guys, great day two in the books. Another day tomorrow, another wall-to-wall coverage. Events tonight tonight stacked up, last night great hallway conversation. We covered that on our intro this morning. Day two was about Michael Dell, Pat Gelsinger conversation. A lot of announcements with Google crashing the party, and a one-on-one exclusive with Sam Ramjay who's VP at Product Management, head of Developer Platforms. Not just Google Cloud, they're brinhing all the developers to bear. Peter this telegraphs your point about Google not to be taken lightly. >> Oh yeah well look. We talked about this earlier, and there are some very real thing that have yet to happen. Just contrast this. Three years or two years ago, if you talked to the Google enterprise group and you said to them, well you have some really great opportunities. What are you going to do with them? They'd say, whatever the consumer guys give us, we'll repackage. And now if you see what Google is doing, they're actually going out and creating new partnerships, creating new technology. They're actually acting like a real enterprise company. It's a transformation that's happening very fast. My guess is there's an enormous amount of stuff that's going underneath the covers at the new Google campus. But it's interesting to see that company become a really enterprise player before our eyes, and it's going to be a consequential player. >> Stu and Dave I want to get your reaction to something, because we saw an observation this morning Peter, I think you started out by saying the whole world's upside down, a whole new way to engage the enterprise. You mentioned VMware transforming as a company, similar to what IBM did many years ago. But we saw Michael Dell here, we heard Sanjay Poonen the COO come on, talking about how they're collaborating. He even made reference to Vmware almost merging with-- Kind of hinting to that where there would be showing up at their show working together closely. A new kind of relationship is building on how to be competitive, yet Google and Microsoft have to kind of catch up. And the question on the table is is there dis-economies of scale in that? Can Google get the enterprise IQ to truly understand the digital transformation and bring that developer communication and that operational scale of Google, and can Microsoft bring that enterprise knowledge of Office, Windows, et cetera to the cloud, at the speed of the disruption, at the same time change how they engage? Stu. >> Yeah, so John it's pretty typical we talk about how when some of these technologies started, it's like oh wait no, they're not ready, don't look at them. Public cloud you know was a dirty word at VMware a couple of years ago. Now we're embracing it. I'm sure you talked about Michael Dell. He's a big partner of Microsoft's. They're going to be doing Azure Stack. The Amazon dynamic is amazing. John last year we said to Pat Kelsner, hey Pat you want to come on the Cube at Reinvent? He's like, oh, you're inviting me? Well we had Sanjen Poonen on at that show. I've mentioned it, I was at the AWS Summit in New York City. VMware was a partner presenting there. People are interested to look at it. How this bakes out. There was you know an interesting thing. A tweet went out from Kelsey Hightower. A lot of people in the open source community was like, you know one technology killing the other, and we always said, you know, VM's going to kill Bare Metal and containers will kill that, and server-less will kill that. And it's a joke of course, because nothing ever dies in IT, it's all additive. >> Man: The Hotel California. >> It's you know, we'll talk to IBM and talk about their Z customers that are running mainframe. Oh and you can run Linux and containers on that too. So IT is a complex world. We're all going to have to kind of live in this space. Heck, so many of our guests that we have on this program, we're interviewing them at the second or third or more company that they've been at. So it's the ebbs and flows of the people and the technology, and it's fun to document. >> Well the question is, is it a zero sum game? I've talked to a number of service providers, some of the 4,400. I haven't talked to the 4,400, but a handful. And they're frankly not happy about the AWS deal. Because they're all trying to compete against AWS, and they're just saying, their narrative is, oh, it's a big straw that's just going to suck everything out. But the question is, is it a zero sum game, or-- I mean datacenters booming, enterprise is booming. Is this one of those boom years that everybody benefits? >> Just note on that. VMware got out of VCloud Air. That actually made those 4,400 happier, because now VMware is no longer a threat as well as a partner-- >> However! >> The Amazon stuff and the Google stuff is bringing back-- >> Yeah they never liked VCloud Air, and yes getting out is a good thing. And then next day, boom. >> To me, the other part of the answer is, does a knowledge of the enterprise and how the legacy and traditional applications matter? And the reality is to Stu's point, since you can check in but you can never leave, that at the end of the day, it's going to matter. Your knowledge of how transaction processing works is going to matter. Your knowledge of how Z series handles storage or handles data is going to matter, in the enterprise. And so the reality is, it's not a zero sum game, there's going to be a lot of, because of the complexity, there's going to be an enormous premium place in experience. How you package that experience, how you present it, there's going to be a lot of niches in this marketplace. A lot of ways of getting to that scale. But there's no question that's what most important is getting there fast and early. >> And the big three, obviously Amazon Microsoft Google, all bring something different to the table. And the question is, what view of the cloud do they bring? VMware taps out of the cloud game with VCloud Air, has an arms dealer-like approach Dave. We talk a lot about being an arms dealer. You know Sanjay was teasing out like, you can have these native clouds, not cloud native. Native cloud players, one two and three, sucking the straw at the top of the power law. But then VMware could service an entire set of new clouds. I call maybe second tier or secondary native clouds, where hey someone's got-- Jeff Rick and I were talking about a drone farming cloud. With drones that have applications for farms. >> There's going to be specialization. >> That speaks to a new set of service providers. And the question is, is the cloud service provider market about to explode? What do you think? >> Explode? >> Meaning great, grow, big. Does that long tail fatten out the neck and the torso? >> Yeah. Because at the end of the day, at the end of the day, where you are located matters. Your ability to bring together classes of services is going to matter, and being able to enfranchise and federate all those things is going to matter. And if it is truly cloud, if it's a common cloud experience, the cost to customer of getting into that is going to be relatively low. And so what you're really testing is, is the cost of getting into a specialized cloud going to be more or less than the cost of going with a general cloud and start adding things? And there's going to be a lot of opportunity to serve particular classes of companies by different characteristics. Let me draw an analogy for you. That we talk about-- I'm going to get political for a second. But we talk about partisanship in the US, right? And many years ago people said, oh, the internet is going to democratize everything, and it's going to be this wonderful-- Well that really happened is the internet made it possible for media companies to enfranchise audiences independent of geography. And now we've got highly specialized media sources that are all retaining to a particular audience. Why wouldn't we expect, since software is effectively media, why wouldn't we expect to see the same exact economics and dynamic happen for some of these specialized audiences? >> John: Make software great again! That's my motto. (laughing) >> To that point, service has always been a highly fragmented and highly specialized market. Cloud is services, and I would expect yes, to answer your question, that you're going to see a lot more service providers explode. But they better have a differentiation strategy relative to AWS. >> So the Tam conversation around that is cool, but what's really happening here that was getting a lot of traction, and we talked about this earlier about the two private cloud report. I asked Sanjay Poonen and then I talked to Sam Ramjay at Google who heads up the development platform in Project Management. You know to your quote this morning, a lot of IT's been driving costs out of business, now we're putting revenue on their agenda. He goes, really? And I asked him, what's your metric for success at Google? And he started to think about it and went back to the business value of technology. So I know this is a research area for you. I want to give you a chance to describe, what's the cutting edge metric around the business value of technology? Because in the cloud, magic quadrants don't matter, okay? The scoreboards are changing. At the end of the day it's what value does technology contribute to business that drives top line revenue? Yeah cost containment I get that, but revenue. >> Well so the traditional way of thinking about ROI or business returns or business value is you say I'm going to say for a given application, for ERP, which is the numerator, which is the benefit, so that's why I classify it. Now I'm going to look at the denominator. Which of the different configurations of technologies make that given set of systems have the highest return? And it all becomes a cost question. So really where this goes is that increasingly what businesses are looking at are saying, my customers are demanding digital engagement. My partners are demanding digital engagement. I'm going to use my data differently. I'm going to turn products into services, I'm going to do all these different things with data. That's where the revenue side comes into play. Now can you argue that it all comes back to costs and automation? Yeah, there's things you can do. But at the end of the day the question is, what does your customer see? Does your customer see a better service or a better capability? A different approach of doing things? That is the non-standard numerator in the equation, and that's where IT is, with the business, is increasingly focusing it's attention. And so increasingly what's happening is we're looking at a common denominator, you know Amazon's pricing and Google's pricing and all these other guys' pricing is going to moderate to a set of common metrics, and that means now we can start talking about the numerator, and how doing the numerator differently is going to be the differential. >> Okay so let's take that and take it to Stu and Dave. I did a comment on, we heard this race to the bottom, race to zero, that's not happening. Your True Private Cloud report shows that the SaaS business and True Private Cloud just by itself is bigger than-- >> And we never believed that. We've never bought into that. >> And you know, it's funny, in some of the analyst sessions you get to talk to some of the customers and talking to some of my peers here, something we hear from a lot of companies, not all of them, but cost isn't number one on the list. Usually it's a agility, it's entering the business, it's being able to move faster. Cost and price of course does matter eventually, but you know it's that being able to react faster, that agility that needs to go there. And I mean there's all of these new technologies that are going to line up. Heck, we're spending all of this time talking about public and private cloud, and edge computing is just going to completely change that landscape even more, as we go forward. >> Look, and the other thing is, Amazon sets a pretty high price umbrella. I've never bought into the race to the bottom, I've always said Amazon's going to be more profitable than everybody. They're an infrastructure company with 30% operating margins which is like a software company! I mean that's basically VMware's operating margin. Maybe VMware's a little higher. And of course Amazon has a much higher capital cost. But there's a big price umbrella that Amazon has created. That's an awesome opportunity. I'm interested in what you guys think about the recent momentum behind VMware. The last two years we've seen a total change, right? Two years ago it was kind of negative, negative growth. And now it's tailwinds, positive momentum. Is this a product cycle, is it you know expanded ELAs? Kind of a one time thing? Or do we think this is a sustainable trend? I mean I've said I think the stock is undervalue. Am I right, is this sustainable? >> I think you're right. To me my observation is, I'll let you guys comment on it, but my observation is VMware was stuck in the middle of an identity crisis between the virtualization op side and trying to do cloud. And you nailed it on the earlier intro segment where you said that there's no cap X there, they've got better margins because of it. And by making a decision on not doing cloud and becoming much more of an arms dealer, you can move the ops into the dev, right? And that's been a big stuck in the mud point from VMware. They've got great ops, great enterprise, but they just weren't nailing the developer side. And that became a problem. Now you have clarity on the wave. Cloud IOT just pointed out, now it's very clear what's going on, and everyone knows where the game is. Then the shift is going to come to, and it's whether Kubernetes announcement with Google today didn't get them a lot of applause in my opinion, Stu I'd love to get your reaction. I don't think this audience can connect the dots yet on that long play of the orchestration. So they're still stuck in I got my house to clean up, I don't want to get the fluff and the head room and the future vision. I got problems to deal with on my upside. Yeah I want to do dev and I want to do dev ops, but shit I got to take care of business! >> Yeah so to Dave's question, VMware had reached a certain point, they'd kind of saturated the market for server virtualization. They made a number of number of bets. Some of them panned out. Airwatch, great acquisition. NICERA, phenomenal acquisition. NSX, we've talked extensively about that. Push towards the developer community? Well, I think they've understood now. Pivotal's going to handle that. We'll shove that over here. There's not a developer track at this show anymore. The cloud piece, they fumbled it, a few times, and now they've kind of understood it. Kind of a natural progression. They've made some moves. The ELA is something I think they've sorted out. Their license agreement, how have the partnerships with customers. We've talked extensively about some of the pricing. >> Some of the deck chairs, the mulligan on Virtustream. Carry on, please. >> So right, it's where they fit, where they partner. The relationship with the ecosystem. And a thing, what drove VMware to where they are, is those partnerships and the technology partnerships as well as the channel partnerships. Some of those things I hear, Kubernetes AWS, VMware on AWS, their partners are like, it's scary. I don't know if I make any money. Is this now VMware and Amazon just go to the bank and they cut me out of the whole thing? Some of these are interesting, right. Most people aren't ready for the container, they're definitely not ready. Kubernetes, they hear about it, but it's pretty early. >> Peter your reaction, 'cause this really points to what Stu's saying. I believe what's saying to be true, because I agree. They did their homework, they were listening. They weren't sticking their heads in the sand at your transformation point. >> So if you're a CIO and you're looking at a whole bunch of change, my business' stance towards digital and technology is changing, my relationships with the business are changing. I now foresee that I'm going to have to reorganize my IT organization to take advantage of things like hyper converge and whatnot. So I'm looking at an enormous transformation. In comes VMware and the first thing out of their mouth is, we really don't know what we're doing. We're throwing a bunch of spaghetti against a wall. Would help you sustain these assets until we figure this all out? The CIO's going to say thank you very much, where's Microsoft? So what's happened is VMware decided to get serious and stable. They decided to make some bets, and a lot of the best that we're making right now we're seeing at the show are probably not going to pan out. But that's okay, because it starts-- >> John: But the big ones are, maybe. >> We think so, we think so. We think anesthetics as well. Stu listed them, we don't have to go over them again. But what we are seeing is-- And Michael Dell and Pat and all the executives over and over. >> They're paying attention. >> Open with an opinion. It's very clear that businesses like the VMware opinion. I think Stu and I and all of us probably agree that they could probably go further with that opinion, they could probably lay out an even better vision of what the cloud experience is going to be as they foresee it and as they're going to engineer to it. But it's very very clear that customers today are saying, I've got all this installed, I'm willing to continue to invest in caretaking all this VMware stuff because they have done a better job of laying out what my options are, whereas a few years ago the options were all over the map, which means they had no options. >> They were groping for something. Okay we've got to wrap it up. I wanted to go around the horn on the final piece. We're going to go out tonight, we're going to party. We're going to socialize, stay up all night long, talking to people getting the data. Not all night, we'll be in bed by 11. (laughs) I'll be in bed by 11, I hope, I hope. Great conversations last night, lot of hallway conversations. Lot of good chatter. So around the horn, most compelling thing that you heard, not in a session, in the hallway, through conversations and interactions. Peter we'll start with you. >> Most compelling thing that I heard is, is there's some new stuff coming in the Google universe. That is going to potentially have a pretty significant impact ultimately on how enterprises look at Google. I found out some interesting stuff there. The most compelling thing just very simply on the VMware side of things was the probably coming out of some of the conversations we had with Chad this morning Dave. And the idea that increasingly you're going to look at these platforms. Platform wars are on the horizon. Where it's going to go back to what we were looking at many years ago in certain respects. But you know written much larger. But the increasingly the way people are going to evaluate the quality of a platform is not intrinsic to the platform, but how well it binds to other platforms. That's probably the most important statement that I heard on the floor today over what's happening. >> John: Stu. >> Continue on kind of Peter's theme. We're starting to see really you know, it's gelling. Some of this multi-cloud messaging, been really teasing out with a lot of people. Once again when I get to talk to the practitioners, as to what applications are they building, where do things go, how are they moving around, and you know VMware is a trusted partner, one they've really turned to for a lot of this. And the customers at least are optimistic about what they're hearing. I've heard a bunch of them are really excited for the VMware and AWS more than I expected to hear, and you know it'll be interesting to see. It's been interesting, we've kind of been saying Microsoft maybe there. When we go to Dell EMC World they're talking a lot about Microsoft. Microsoft Ignite's coming up, there will be a huge push. We've said for years, who has the best hybrid strategy? It's got to be Microsoft, hands down. >> Although we haven't mentioned Oracle. Oracle is still not out of this. >> Yeah, absolutely. I always say follow the applications, follow the data. Oracle, Microsoft, huge application portfolio. >> You know I haven't heard one person talk about Microsoft or Oracle here, not one. Dave? >> I want to chime in. >> I've spent the last 24 hours, I've talked to a number of customers. And I will tell you, they're strugglin' to move fast. And that's I think good news for VMware and Dell EMC, because you know all the vision that's put forth, and all this cloud native stuff, and they're really having a hard time digesting a lot of this stuff. You've been saying it for a while, hybrid cloud is BS, nobody's doing hybrid cloud, as it's sort of been defined in early days. Like federated apps, nobody's even thinking about it, not even close. Yeah multi-cloud because I'm getting inundated with all these clouds. So they're really having a hard time moving. So I think that's a good trend. >> Dave, I heard a great line in this. VMware is moving at the speed of the CIO. >> Yeah, it's true. >> That's a great line. >> That's a kind of double-edged comment, but you know absolutely. You want to stay at least up with most of your customers. >> I will say, I said hybrid cloud is BS. I did say it mainly because it's not ready for prime time in my opinion, but. >> Stu: Is it a way station, John? >> Yeah it's a halfway house or it's a way station, whatever you want to call it. >> It's a cul-de-sac! (laughing) >> Sanjay used that line today. Okay my final observation is more of kind of an epiphany from me that kind of wasn't really blind spot but it was an awakening. The customers I've been talking to are really struggling with the merging of multiple stacks. Hardware and software. In new use cases that have been untested and undocumented, and that's causing to the speed of the CIO conversation of, wait a minute we can't just deploy some of this stuff at scale until we do our homework. We've got to get the hardware stacks and the software stacks working together. We've heard it a lot, that's been the number one hallway conversation. That means there's a lot more work to do on that front. Well guys-- >> But it's a working together part. It's that how they bind together. >> It's these new use cases of working together. This is not a software vendor and a hardware vendor, it's all going to be a data vendor at the end of the day! And we'll see who can bring the stacks together. Okay Pat Gelsigner, we had Michael Del, Sanjay Poonen. Great day guys, great stuff. Let's go hit the hallway, go hit some of these parties and get more data for you guys. Thanks for watching the Cube, live in Las Vegas. Wrap of day two here. I'm John Furrier, Dave Vellante, Peter Burris and Stu Miniman. This is the Cube, thanks for watching.