>> 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)

>> From the SiliconANGLE Media office in Boston, Massachusetts, it's "theCUBE." Now, here's your host, Dave Vellante. (upbeat music) >> Hello everyone and welcome to this week's episode of "theCUBE Insights," powered by ETR. In this "Breaking Analysis," I want to look into Cisco. You know theCUBE is in Barcelona this week to cover Cisco Live. There's an expected attendance of about 17,000 people. Now today, Cisco is a company in transition. It remains a leader in key segments, but it's refocusing its business for the next decade, having exited a number of areas over the last several years. Allow me to briefly give you my perspective and review how we got here. Near the end of the dot-com bubble, Cisco was the most valuable company in the world, with a $500 billion market cap. It was one of the four horsemen of the internet, remember that? Along with Oracle, Sun, and EMC. Cisco really rose to prominence by betting big on ethernet. Old reliable TCP/IP was the linchpin of the internet, and allowed Cisco to power the wave that virtually decimated the mini-computer industry in the 1990s. There were many levers that Cisco pulled, brilliantly, during its ascendancy, and I want to call out two big ones. First was it created an army of network engineers. Literally hundreds of thousands of professionals trained on installing, configuring, managing, and optimizing Cisco gear. Cisco created very complex solutions and thrived on this complexity, and the Cisco Certified Inter-network Experts, or CCIEs, deeply understood the dark art of networking, and Cisco was their beacon. The second was acquisitions. Under the leadership of CEO John Chambers, Cisco completed about 180 acquisitions over a roughly 20-year period. This enabled TAM expansion, growth, and maintained Cisco's relevance to customers, who very typically and often were the generator of acquisition ideas. Cisco diversified quickly into a conglomerate with a portfolio that spanned video, set-top boxes, telepresence, compute, collaboration, security, wireless. At one point, Chambers talked about dozens of adjacent businesses, each of which would account for a billion dollars of incremental revenue for Cisco. Many, if not most, didn't pan out, and Chambers slashed and burned prior to handing the reins over to current CEO, Chuck Robbins. Now, under Robbins, Cisco was a more focused company, kind of going back to the basics. They're betting on what I would say are more sure bets, including data center, wireless, collaboration, security, and the Edge. Cisco is also evolving its model towards software subscriptions. Now today, I want to look at how some of those bets are performing. I'll discuss the impact of cloud on Cisco's business, and then I want to drill in to the performance in some areas like networking, collaboration, security, and then close on hyper-converged. And then the last thing I'm going to do is share some things that I'm watching as barometers of success, over the next 18 to 24 months. Now the first thing I want to do is give you a snapshot of Cisco's financials today. What this chart shows is some KPIs on a trailing 12-month basis. Cisco is about a $50 billion company with a $200 billion market value. That's a 4X revenue multiple, which is pretty good for a company that's generally viewed as a traditional hardware player. Now Cisco is guiding analysts on a flat to down year, and talking about a challenging macro environment, despite the stock market's seemingly insurmountable rise. Cisco is a very profitable company, with a 33% operating margin, and very nice, 66%, roughly, gross margin. Cisco throws off a lot of cash, around $15 billion annually in free cashflow. They make a big deal that 70% of its software revenue is now coming from subscriptions. And Cisco is mandating a new consumption model that is subscription-based. Now it's somewhat hard to tell exactly how large Cisco's software revenue is, as they're opaque in that detail, but I'm pegging it at between 11 and 12 billion by the end of this year. Today it's probably seven to eight billion. Cisco is riding some big waves, adding software to its portfolio, security grew at 22% last quarter, Wi-Fi 6, 5G, which by 2021 should start kicking in, it uses a chunk of its cash of course to buy back stock to keep the street happy, and it's leveraging a leadership position to compete. Now finally, I want to make some comments, later actually, on how they're approaching developers in a strategy that I really like. Now there are some headwinds that Cisco's facing, namely cloud, this macro picture that they talk about, which is not positive for them evidently, the company's overall complex portfolio, the competitive dynamics, and the perception that they have an aging, or that they are an aging hardware company, and they're really still touting, selling ports. So, let's drill into some of the spending data, and I want to start with this notion of leadership. This chart shows Cisco's position in its core networking segment. The chart depicts market share over time, which remember is a measure of pervasiveness into each ETR dataset. Now look at what happens. Look how Cisco maintains its leadership, far outpacing the others in this networking sector each quarter. I'm going to make some comments on the sector overall, but notice the net score in the blue bars, which is a measure of spending velocity. It holds firm at 25%. Not great, but holding steady. And you can see the pie chart of the public cloud's impact on the sector, and I'm going to make some comments there later as we go on. But first let's look at the networking sector overall. ETR just released its January survey, and here's what they said in their sentiment on networking. So, when you see the networking space, it's been sort of down for a while, and ETR has been somewhat negative on the entire space, but what this shows is really net score, which is spending velocity, and the January 2020 results, with previous periods within Fortune 500 buyers. And you can see there's an uptick in momentum for networking generally, and Cisco is really cited as rebounding. But now look at the blue call-out. It's from an ETR VENN discussion, with an IT buyer, who essentially says, "Look, as we move to the cloud, "we are going to spend less on networking gear." And given that Cisco is the leader, we want to understand how the public cloud is affecting Cisco's networking business. So to answer that, what I'm showing here is data from the latest ETR January spending survey. And I'm filtering the data on organizations that are spending on AWS, Azure, and Google Cloud platform, and showing Cisco's performance measured in market share, or pervasiveness. You see, that's what's happening now in these big cloud accounts. There's an N of 809 cloud customers, and 480 Cisco customers within those accounts. And you can see the impact that the cloud is having on Cisco, much the same way it is affecting virtually every large supplier of on prime infrastructure. A slow, steady decline over the past 10 years. And you can see a net score, which measures spending intensity, in the upper right-hand corner, of almost 30%, which is somewhat lower than Cisco's average in the ETR dataset. But the story's not just about cloud. There are other waves in the industry, of what I've referred to in the past as innovation cocktail ingredients, namely data, plus AI, plus cloud. So the next question I want to pose is, how is Cisco doing in leveraging these waves? So here we have 916 customers in these superpower segments of data, AI, and cloud, that are combined, and we show the market share, or pervasiveness, over time, of Cisco, as compared to VMware's NSX, HPE, and Dell EMC. What the data shows is a couple of points. One is that Cisco is the most pervasive competitor shown in these customer segments. Its net score is 37%, four points higher, meaningfully, than the cloud-only chart. Actually seven points higher than I showed earlier. Only NSX has a higher net score, and relatively speaking, NSX is much newer, and should be growing much faster than Cisco, so that makes sense. So I would say that Cisco is holding its own here. Its challenge really, in my view, is to use data and AI to create better customer experiences. So, be a consumer of AI, if you will, as a means of better serving customers, and compete in the multi-cloud market directly with these players and others, none of whom own a public cloud. Okay, so I spoke earlier about Cisco's portfolio, so let's look at some of the ETR data, and see how various parts of Cisco's business are doing. This chart shows the net score, or remember, spending velocity, across Cisco's offerings, and includes Meraki, which is wireless, AppDynamics, AppD, is application performance management, we're showing here Cisco overall, Cisco Umbrella, which is cloud and DNS security, and Springpath, which comprises infrastructure for Cisco's hyper-converged offering. And as you can see, the segments in which Cisco plays, there are 10 in the ETR taxonomy, spanning analytics, security, mobile, device management, infrastructure, video conferencing, et cetera, et cetera. In the interest of time, I will say just the following. Red is bad, green is good, and gray is neutral. And again, Cisco is holding its own in these major segments, with decent spending velocity. So now, let's take a look in an area that I think is going to get a lot of attention in Cisco Live, and that's collaboration. This ETR chart that I ran shows net score, or spending velocity, for video conferencing platforms. And you can see, Cisco, they got some work to do. It's sort of teetering on the red zone. So I would expect some continued enhancements there. Now comparatively, you can see GotoMeeting losing steam, and Skype really falling off a cliff in January, but look at Microsoft Teams, that blue dot, with very very strong momentum. So what Microsoft's doing is they're migrating Skype and Lync, their install base, to Teams, and they're really really well-positioned there. And you can see as well, newcomer Zoom is right there in the mix, across this sample of 500 buyers. Now, I want to turn your attention to a really important sector, which of course is security. This chart that I'm showing here shows net score, again, spending velocity, in the cyber security sector. And Cisco is both large and credible in this space. Its security business grew 22% last quarter, as I said, and it's at a $3.2 billion run rate. So, spending momentum, maybe not as strong as Palo Alto Networks, which I'm showing here, and it's not as high as the rocket ship companies, like CrowdStrike, or Okta, or CyberArk, or SailPoint, or some of the others that I've highlighted in previous "Breaking Analysis" episodes, but Cisco's pretty solid. And you can see the likes of IBM and Symantec, by comparison, these guys are leaders in security, but their spending momentum is in the red. So once again, the steam of Cisco as a large player who has credibility, this story is playing out. And clearly this is going to be an area of focus at Cisco Live. So this next data point is kind of interesting, and looks at Cisco's data center business, and specifically, I'm trying to better understand what's going on in hyper-converged, the software-defined platforms that bring together storage, compute, and networking. Now the power of the ETR platform is that I can ask the question, how are the hyper-converged players doing inside of Cisco accounts? So what I've done is I've filtered on 458 Cisco accounts across three sectors, storage, compute, and networking, and I've isolated on Nutanix, VMware, or VMware's vSAN, Cisco itself, and Dell EMC with VxRail. And what we're doing is we're showing net score, or spending intensity, spending velocity. And the first thing to point out is that all of the vendors are in the green, and that's because this is a growing market that still has legs. Nutanix has noticeable spending momentum, ahead of vSAN, ahead of Cisco, and Dell EMC. Now here's the thing about Cisco. On the one hand, it's putting forth its own HyperFlex platform, based on the Springpath acquisition. But it has to tread carefully because it partners with converge players, like NetApp with FlexPod and IBM with VersaStack. And its HyperFlex, as an HCI play, is essentially designed to replace converge platforms like these. Now the same is true for VBlock, the business with Dell EMC, the old VCE business, but Cisco and Dell are at each other's throats, so, neither really cares that it's replacing them. Okay, long segment, a lot to cover, I got to wrap, but I want to end by saying what to look for over the next sort of 18 to 24 months as barometers. First thing is the pace of transition to software. The second thing that I'm watching is the uptake of the new core announcement that Cisco just made for big routers, silicon, and optics. This is Cisco's wheelhouse, and I expect that the 5G rollout in 2021 is really going to start to pick up and be a tailwind for Cisco. You know the macro should be a concern. Cisco is saying its business is soft, kind of across the board, there's China, there's Brexit, but the S and P is on fire. Now does that mean upside for Cisco? In other words, are they sandbagging a little bit? Or, are there more fundamental, structural, or execution issues? I think personally, Cisco may have a little bit of upside here, but they're big and exposed, so that's something to watch. The other thing is the impact of cloud on Cisco's business, and the company's ability to compete in multi-cloud, including how it embraces Kubernetes. Cisco, and I've said this before, has to position itself as the best, the most cost-effective, the most secure, and highest performance network to connect hybrid and multi-clouds. Now as well, the company's got to hold serve in networking, which I fully expect it to do. We're seeing a little uptick in Juniper, Arista's doing okay, but they're sort of smaller in the grand scheme of things relative to Cisco. Now the wild card here is VMware's NSX. So we'll be watching that and what impact it has. A lot of customers have both. Finally, I want to talk about developers. Cisco DevNet, as I've said many times, I really like what Cisco is doing there. I think they've outshone some of the traditional players. They are retraining hundred of thousands of CCIEs to code in Python, and really, code Cisco infrastructure. So Cisco has an infrastructure-as-code strategy that's going to help propel them in multi-cloud, the Edge, new Workloads, and they're leveraging this engineering force that they have. So, very long segment here. Watch the coverage at Cisco Live on theCUBE and on SiliconANGLE. It's a big chewy company, and a lot for me to swallow in one of these segments. So tweet me @DVellante if I've missed something, or comment on my LinkedIn feed, or you can email me at David.Vellante@SiliconANGLE.com. Thanks for watching, everybody. We'll see you next time on "Breaking Analysis, "theCUBE Insights," powered by ETR. (upbeat music)

>> From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCube. (techno music) Now here's your host, Dave Vellante. >> Hi everybody, this is Dave Vellante and welcome to this special Cube Insights, powered by ETR. We've been running these Breaking Analysis Segments and today we're going to talk about some spending data that shows that there's continued interest in hyperconverged infrastructure. So we've been running these segments over the last several weeks with our partner ETR. They've got a database of about 4,500 IT Practitioners and CIOs. They go out quarterly and ask spending intentions. So we've been sharing that, along with our opinions. These are completely independent segments. I want to disclose that a number of the companies that we're talking about today: Nutanix, VMware, Dell EMC, Cisco, HPE. They sponsor theCube, but they have absolutely no input into editorial. They don't affect our opinion in any way, shape or form. So let's get into it. I'm here with Stu Miniman. Stu is an expert in this field. He's covered the space. Stu, let's look at some of the fundamentals. What do people need to know... Alex, if ya put up the slide, Stu, maybe you could talk to it. >> Yeah. Dave, thanks. I've been watching you have some fun with this. I enjoyed swimming in some of the data here and as you know, Dave, we've been watching since before hyperconverged infrastructure, or HCI, was a term that everybody talked about. We've been looking at how these hyperscale trends are going to impact the Enterprise. We put out our server SAN research years and years ago, so we know all these companies really well. And despite the latest AI and cloud and everything, the data shows, HCI, the simplification of the data center, building out what we would call True Private Cloud is important today. So right, we wanted to know when you look at the data, first of all, how are the vendors doing? Who are the leaders in this space here? There were a whole number of startups that came in this space. When we first analyzed the market it was companies like Microsoft and VMware that owned the operating system we thought would be hugely important. If you look in the big names this environment: Dell partnered with everyone, of course they bought Dell, bought EMC, which included a stake in VMware. What's that relationship with Nutanix? How is that shaping the market? As well as how is cloud impacting things? Both from a spending standpoint, has cloud sucked away revenue from HCI as that specter has overhung everybody in the IT space? And also, how does HCI fit into multicloud and how does that fit? >> Okay, great. So thanks for that setup, Stu, now let's get into some of the data. Alex, if you bring up the slide, the next slide. This is spending intentions for Nutanix, VMware and some other vendors. I'll go through that. But it's basically showing Nutanix and VMware are fighting it out. You know they're in this internecine battle and in social, and (chuckles) there's a war goin' on, because there's big money to be made here. So for those of you who are familiar with these segments, this is data from Enterprise Technology Research, from their July 2019 Spending Intentions Survey. So they're asking about spending intentions for the second half of 2019. The end of the survey, out of the 4,500 people in the panel, 1,068 responded to this survey. So on the left hand side you see the vendors: Nutanix, VMware with vSAN, Dell EMC with VxRail, specifically. Then SimpliVity, and then Springpath, or Cisco. So what the chart shows is what we call, Net Score. And net score is calculated by taking the red, on the bar, which is, we're going to leave the platform, that's the dark red. The lighter red, which is, we're going to spend less in the second half. The gray, which their spending's going to be flat. The dark green, or the evergreen, which says, we're going to increase spending. And the lime green, which I'm going to add to the platform. You take the green, minus the red, you get net score. Higher the net score, the better. You can see, Nutanix and VMware with vSAN are leading the pack. And then we'll go through that. But then you see, Shared Accounts. That's the number of indications for spending that they received out of those 1068. So Stu, what is this data telling you? >> So first of all, Dave, it confirmed kind of the general market share numbers that we hear out there. The vendors that track that on quarterly. VMware has the most customers, has the largest revenue, and their largest partner for that, of course, is Dell. VMware and Dell go to market, joint product development, joint engineering, joint go to market and it's the biggest piece of vSAN, so that's where we specifically wanted to look at the VxRail. And vSAN and VxRail, doing very well. They're adding new customers; was interesting to me that you saw VxRail kind of ramping up a little more on the, attracting new companies, but also looked to be losing some on the tail end of the dark red. As opposed to vSAN in general, is a little bit more stable. We know how many thousands of customers they have out there, and Vmware's a software story as opposed to VxRail is that full appliance. Nutanix is the second horse in this two-horse race that we're really talking about here, from HCI. There's some discussion in the marketplace after two quarters being down, is Nutanix showing weakness? What's happening there? The most recent quarter announcement was that Nutanix is doing well, seems to... They had a little bit of change as they're going through their move to a software model and sorting things out with sales and marketing in their channel. The data here shows that the second half of the year looks good for Nutanix. So to some of the questions I asked in the first slide, Dave, Nutanix and VMware, of course the clear leaders in this space. SimpliVity, which was of course bought be HP, Springpath which is the hyperflex from Cisco, are far behind those two out there. And it seems that even though Dell and VMware are fighting, very much with Nutanix, that is not heavily dampening Nutanix's from the respondents in this survey. >> Okay, and just a word on the data, so you see 184 shared accounts for Nutanix, 174 for VMware and down the line. Only 42 for SimpliVity and only 18 for Springpath, and Cisco. It's an indication of the size of the install base, obviously the more shared accounts, the more mentions, the larger the install base. Again, they're statistically significant; ETR does a very good job of that. Let's look Stu, at... Oh, actually I want to make another point here. So how are these net scores? Well let's put 'em in context. The hottest net scores we've seen recently are: Snowflake, and UiPath, with 80% plus, net score. Okay, so that's really, they're off the charts, they're growing like crazy. We saw Salesforce with 55%, so, and Workday sort of in there as well. Companies that are growing share. So SAP in the 30% range, and so you see the Dell EMC, VxRail, that's kind of holding serve. It's not like, dramatically gaining share, but they're growing a little bit and then-- >> And I think it's a lot, Dave, it shows to the maturity of this market. HCI is not new, both Nutanix and VMware have thousands of customers, specifically with V's then we're talking VMware. So it was more, when I saw some of your charts, Microsoft has a similar net score. >> Right >> Well liked, good install based, still growing and the like. And brings in the discussion of when we did some cross section of the analysis looking at cloud companies and how does this impact their public cloud spend; is this detracting if this customer's also doing public cloud? And the long and the short of it is VMware and Nutanix are pretty much the same if not actually a little bit better when you talk about a customer that's looking at their overall cloud spend. So to me that really signals that both VMware and Nutanix are doing a good job into how their solution fits into the customer's overall hybrid cloud strategy. >> All right, let's take a look at the next slide, which talks to time series. So this is hyperconverged infrastructure spending intentions again, for the second half of 2019, over time. So the July '19 Survey you can see is the most recent one. We go all the way back to January '17 and you can see Nutanix on the top, VMware or vSAN on the bottom. We just selected those two. We're just repeating the net score and the shared accounts. And you can see these things tend to bounce around a little bit. You can see Nutanix maintains a lead, but the market's startin' to converge. These two companies are coming together. We hear a lot about vSAN doing very well, it's kind of held on. You can see a slight downward pressure in July, in the July survey. It's unclear what that means. That could be an indication of just some uncertainty in the marketplace. Some economic macro concerns. Tariffs, potential headwinds there, so there could be some uncertainty there. But what do you takeaway from this slide, Stu? >> Yeah, first of all right. As you show, Dave, VMware is a bit more steady, Nutanix gone up for bit and come down. Both of them stayed relatively stable. Somewhere between kind of the 45 and 55 lately. A little bit, if you look at the overall trend, Nutanix is down. VMware could surpass them from the net score in the future, if this trend holds. But both of them doing quite well. When you looked at all the other vendors in there, of course the scale is just showing 40-70%, if you put all the others, which are down much lower, you can see once again, that kind of the clear leadership. These two companies, just strong lead. Does not look like there any challengers in this space that are ready to be a clear number three yet, in the market. >> But Nutanix at one point had no competition. >> Yeah. >> Okay, now vSAN comes in and of course-- >> Oh no, absolutely. So no, SimpliVity and Scale Computing, and there were a whole host of startups. There's all the brand new startups in the space. Everything from little companies like Diamante, Pivot3, who was around doing this before it came. So there's always been a lot there, but Nutanix is the one that separated from the pack. The only one in this space that's gone IPO. But VMware's there, Microsoft won that, they rebranded their Azure Stack HCI for what they put in the data center last year. So expect Microsoft partnering with all of the big server manufacturers to push farther into HCI, but really has not directly impacted this market too much, just yet. >> But there's definitely been some pressure on Nutanix from an earning standpoint, the stock's been hit. You've had some executive departures. There's some rumors about acquisition with Google. Your thoughts on-- >> Yeah, definitely. So John Furrier just had Dheeraj Pandey, the CEO of Nutanix, in our Palo Alto studio, leading up to the Copenhagen show for Nutanix that I will be at. Sure. Sunil Potti who was basically the number two at Nutanix, is now working for Thomas Kurian, TK, over at Google Cloud. My indication from what I hear, he is not over there to help broker a deal. Sunil had a great run at Nutanix, there was a clean break there, but there is a mostly new executive team at Nutanix. Now a couple of years past the IPO and the team at Nutanix, they have their platform. The have a bunch of SaaS offerings that they're doing there. Do they have a relationship with Google? Absolutely! They had Diane Greene at one of their events a couple of years ago. They did joint engineering. But I actually saw that engineering effort cool off a little bit in the last year or so since the new regime came on in Google Cloud. So does Nutanix have a lot of Enterprise accounts and know how to work with the Enterprise and could that be a boon to Google? Absolutely! But the personnel of a Nutanix executive over at Google, and Brian Stevens who's the CTO of Google Cloud being on the Board of Nutanix? I do not think that that is telegraphing that an acquisition is going to happen. It could. We see lots of big acquisitions. Nine or 10 billion dollars from Nutanix could be interesting for Nutanix and help them get in a lot of places and help Google. But Dave, I goin' on record say, I don't think it's going to happen. I don't think Cisco is going to buy Nutanix. Infrastructure's not the real push for Chuck Robbins and that team. And at the Google Cloud event, Dave, that we were at, we saw Sanjay Poonen from VMware up on stage touting how deeply VMware was going to partner. So both VMware and Nutanix are partnering with all of the clouds. VMware of course has a very deep relationship with VMware. They're going deeper with Google, they are even partnering with the old enemy of Microsoft, so I would give VMware definitely has a deeper and more public relationship with all the public cloud providers but Nutanix is also partnering and expanding their portfolio to give themselves good growth beyond just the core HCI market. >> HP's another one. So Nutanix and HPE are workin' together. Kind of the enemy of my enemy is my friend. Nutanix was not at VMworld this year; they're kind of booted out. So they belly up to HP. >> Yeah, HP loves having, they have their, "As a service offerings," and Nutanix is one of those as well as Nutanix can sell the HP. So as the, right, the Dell relationship is likely going to die down over time, as Michael Dell on the team, want to sell more Dell hardware with VMware software. HPE is another... And they also partner with Lenovo on the Nutanix side. >> All right, Stu, bring it home. What are the key takeaways on this cube Insights. >> Okay, so HCI, who is a two-horse race right now. There are interesting companies to look at beyond the two, but if you want to understand who the leaders are in the space it is: VMware, especially with their VxRail and Nutanix, are the two leaders in that space. Really looking and understanding how they're expanding into multicloud and hybrid cloud solutions. VMware very much with their VCF offering, which packages vSAN to go into the VMware cloud offerings. And Nutanix with an interesting strategy, both with how they really spread some of their services like what they're doing with Xi Cloud, as well as some SaaS offerings, which some of them really have a disconnect. Not in a bad way, but just are not tied directly to the hardware. What the infrastructure companies have tried to do for years. Both of them, VMware's done tons of acquisitions. Nutanix has done quite a few acquisitions too. >> So your second point here, what's the impact of Dell VMware versus the Nutanix battle? You say not a significant impact on spending intentions yet. I mean there's clearly some evidence that those two markets are comin' together, that VMware's pressuring Nutanix. But why do you say, yet? What do you expect? I mean is it the OEM deal with Dell? >> It's the OAM relationship. There is huge pipeline of Dell hardware with Nutanix software and they're at loggerheads. So absolutely, the Dell family: Dell, EMC and VMware are doing all they can to dial that down. So they put pressure on the channel. And even some of the most loyal Nutanix channel partners that work with Dell, have had pressure to do more and more VxRail. So I expect it to have impact, but just as, Dave, I'll dial back the clock. You probably remember when EMC had a relationship with HP and HP killed the OEM of EMC storage. EMC stormed back and got a lot of those accounts. Same thing happened when EMC and Dell broke up a couple of years before the acquisition. So Nutanix is storming to go with HPE as one of their server partners, and (mumbles). So can Nutanix keep their growth and momentum going as Dell is no longer their biggest partner? >> Well, they're fighting a two-front war. They've got one with Dell VMware and they're also fighting the war with the public cloud guys, even though they're partnering with the public cloud guys. All right, they're sort of taking that cloud model but of course it's on prim. So you say how this public cloud affects HCI spending; not a significant impact on spending intentions yet. Can I infer from that that you do expect there to be pressure on that second front? >> Yeah, so as I've talked about before Dave, when we look at VMware and VMware gives the VMware cloud in AWS. Some say, "Great, that gives me a nice path to be able to use public cloud. But maybe I don't need some of this VMware licensing and software in there." The question for Nutanix is very similar. What services do they have? How do they become more sticky in customer environments? And absolutely, they're driving a roadmap for that in working with their customers. >> Well the thing about Nutanix is that customer's really happy. The customer's really like Nutanix. They like the simplicity. I've talked to a number of Nutanix customers that are very happy in that regard. And they have a leading product in that regard. But they're aiming at the multicloud space and can they play there? >> And Dave, you make a really good point. The killer use case, what did HCI deliver? It delivered simplicity. Today, if you talk about public cloud in general or even hybrid or multicloud, (chuckles) simplicity is not how you would describe this. So can the customers, the companies that did HCI, so, VMware, Nutanix, HPE and Cisco, they're all fighting for that hybrid and multicloud environment. And if they can help deliver simplicity of management, simplicity of leveraging my data, they can be successful in that space. >> Okay, so you're sort of positive on the multicloud, their position in multicloud. Even though they're not one of the big five. >> Yeah, and the good news for a Nutanix is that they're growing off of a much smaller base then say VMware, when you say they have five or 600,000 customers. Hey, how big of an impact will public cloud have on them? >> All right, so we don't pick stocks. We're not making recommendations. (laughs) But, do you feel like it's overdone, that it's undervalued? Independent of the macro. Do you feel like the pressure on Nutanix is warranted, or do you feel like it's got legs? >> So I feel Wall Street tends to over adjust when they go through things. When I talk to my friends on the Wall Street stuff. Definitely Nutanix took more of a beating probably then they should have. But they had two quarters that weren't great. And some of that was the management changes, they blamed that they couldn't hire sales and marketing fast enough. Something we'd asked, if you're a company in the Valley and you've gone from a few hundred people to a few thousand people. How do you keep adding good quality people? That's challenging. So yes, I think we've actually seen Dave, in the last week, or so Nutanix has been one of the fastest growing stocks in the tech market. So they're adjusting some. So I still think Nutanix has plenty of room for growth. The question is, what's their path to say, two billion dollars? Or is it an exit for 9-10 billion dollars down the road? >> All right, Stu, some great stuff. Thank you for that analysis. And thank you for watching this episode of theCube Insights, powered by ETR. This is Dave Vellante, for Stu Miniman, we'll see ya next time. (techno music)

>> Live from Orlando, Florida. It's theCUBE. Covering Cisco Live 2018. Brought to you by Cisco, NetApp, and theCUBE's ecosystem partners. >> Welcome back. This is Stu Miniman and you're watching theCUBE's coverage of Cisco Live 2018 in Orlando, Florida. Happy to welcome to the program, welcome back to the program first, Vinu Thomas, who's the CTO of Presidio and welcome to the program for the first time Brad Haczynski, who's a general manager with Intel. Gentleman, thanks so much for joining us. >> Thank you Stu for having us. >> Alright so, we're about the midway point of the show. It actually been many years since I'd been at Cisco Live. 26,000 people here. Seeing a large transformation in what's going on from Cisco, you know, still dominant in the network space, but talk a lot about cloud. We're here in the DevNet Zone, where, you know, one of the big news pieces was 500,000 developers registered on the platform here. What's your take been of the show so far? >> Yeah, I mean Presidio has been a long term proud partner with Cisco. We've been a gold and master partner for the longest time. As Cisco started to really transition into the software design world, Presidio started investing along with Cisco. So back at the DevNet Zone, you'll find that Presidio has a number of showcase items about DevOps, especially about things like Cat9k and HyperFlex. So we are excited on this partnership with Cisco, and with Intel, and what we are trying to do. So, good times. >> Yeah, Brad, same for you. >> Oh absolutely. I think this is my fifth Cisco Live. And seeing the evolution of Cisco as they traverse from becoming a hardware centric company into a company that's truly evolving around software, and services, and capabilities. As the world becomes more complicated, they're truly innovating in ways to create the business outcomes that customers are looking for in these complicated environments. And as Intel, it's been really exciting because we transform into a data centric company. We talk a lot about that. The Intel technology has been the underpinning of many of the Cisco technologies that are continuing then down this path. And of course our great partnership with Presidio it's a great triangulation effect and it's great to see at Cisco Live. >> Vinu, change isn't always easy. I think back actually, you know, I've worked a long time on the vendor side. And when Cisco came out with UCS and started doing things like Vblock, you know there were some folks at Presidio who were like, "We make a lot of money racking, stacking, cabling" "these solutions." Conversion infrastructure, hyper conversion structure, cloud solutions. Talk a little bit about the partnership. How Presidio's been, you know, helping to expand and mature with these offerings. >> Yeah, you know the whole digital transformation is the one that's driving this move from legacy three tier architecture into conversation to hyper conversion to multicloud. And what we've realized along this journey is we had to transform ourselves. So we went from saying, "You know, look we wanted to be" "the number one digital transformation" "solutions provider building secure" "digital infrastructure in a multicloud world." And for us to be in a position to put that vision into execution, we had to really partner with Cisco, partner with companies like VMware and Vblock and obviously the other providers in the hyper converg space and also with Intel to really try and take our ability to, not just rack and stack, but to design solutions so we created what we call as Presidio Data Center Solutions Set where we bring all this together. We're able to do some custom modification on these things. And we had to that because that's what our customers were asking us for. And then wrap that around with managed services so we can essentially offer a true platform as a service. >> Yeah, I'd love to hear from your viewpoint. What are your customers saying to you when you know, they say "I've got a cloud strategy" or "I'm building my cloud strategy." What does that mean to them? What's important to them? And you know, I'm sure you got solutions that fit. >> Yeah, we, you know Stu, we've seen a slight change. It used to be that it was a cloud first strategy. And now I would kinda as a cloud right strategy. Which is let me choose the right cloud for the right type of workload. Make sure that I have an optimized workload placement in which cloud. One of the value adds that we bring is we can evaluate all those workloads and applications and your use cases, like your data center, and then recommend to you, in partnership with Cisco and Intel, what is the right placement for your workload. Now when you look at what is coming up in the future is, you know, the world is getting into containers. And you look at Cisco's strategy with containers. You know, their Cisco container platform, what they're doing with Google, Presidio's right in the center of that along with Intel. Where we are building solutions in a multicloud fashion. So HyperFlex for the on-prem. Running on top of HyperFlex is a Cisco container platform and then we are able to then take that and merge that with Google Cloud. That's what customers want. They want that flexibility to say, "If this is the workload that needs to be on-prem, great." "If this is something that I need to move" "as my applications get containerized," that's what they want to go to. >> Yeah, Brad. You've got a large team playing in all of these environments. I remember, you know, optimization for virtualization, back in the day. When I was first learning about containers, Intel Developer Form was one of the places I went to go learn about this. Build on what Vinu was saying as to, you know, where your teams are making bets and helping to, you know, optimize and build solutions for customers. >> Yeah, absolutely. I think Vinu said it very well. Especially if your auger in on the world of cloud. One of the challenges, I think, enterprise customers have really had is, it's about cloud's economics. I think that's basically the underpinning of what Vinu was talking about is the economies of scale and capability of the large public cloud service providers have caused most enterprise customers to pause. So I think what customers are really looking for is, "How do I deploy applications?" The scalability with ease of deployment while having policy round security, networking, compute storage, et cetera. And then move the applications around the data center. What Intel does is we work very closely with Cisco as they're designing a lot of these platforms. HyperFlex is an example is you know, utilizing, best utilizing some of the underpinnings of the C compiler or whether it's the ISL instruction set. The storage acceleration libraries which are part of the CPU telemetry. In which they can, you know, take the code from Springpath and really fine tune it to get the best performance. And then by the time, you know, Presidio gets it in house, they further fine tune it for the customer needs. So it's just a great triangulation. And then we want a scale when Cisco scales in the market, Intel wins. Across the entire stack of compute, network, and storage. So, therefore, it's very very you know, we're all in the same boat rowing in the same direction. >> It's a very good cohesive partnership. >> Yes, cohesiveness. >> It's so funny, cuz so much has wave. We talk a lot about simplicity. And it's like, oh well, you know, HCI and public cloud we're gonna make it really simple. It's gonna be heterogeneous. Some people like, oh remember it was like white box and nothing fancy. It's like, underneath the covers there's a lot that goes in to make sure that. I say we're in a world of hyper optimization. >> Yes. >> Because there's a lot of things that have to. Talk a little bit about that balance. >> So a perfect example of that is what we build in partnership with Intel and Cisco is a Presidio Data Center Solutions Set. So the challenge our customers were having is, yeah, it's great to get a hyper converg, but the hyper converg has to plug into something. It has to be on a rack. It has to be, you know, power cooling has to be measured. You know, we have to get telemetry data you know, using Intel CPUs. So what we decided to do was, we built a custom based solution, call it a cloud in a box, with hyper converged, with the networking gear in it, with advance software solutions, with power cooling, and we wrapped around our professional services and managed services. And what we also helped our customers to do is if they decided that they want to consume this as a service in a OpEx model, we could do that. If they wanted to do it in a CapEx, we could do that. So we made it very flexible. Because it's not just about hyper converg. Hyper converg has to connect. Hyper converg has to be load balanced. Then there's a possibility that you want to connect to a GCP or an AWS so, there was a lot of things that we could do with that. >> Yeah Brad, we talk about customers want to have a similar operating model. Whether it's in their data center or you know, outside of their environment. You know, I think Intel at the bottom layer helps but how do you help make sure there's flexibility as customers choose all of their various solutions in a multicloud world? >> Well, first and foremost, I think that has a lot to do with, we have a significant partnership with most of the public cloud service providers. It's no secret that, you know, whether it's GCP, it's AWS or it's Azure, or even Baidu, Alibaba, Tencent, that these data centers are built upon Intel technologies. And then as you get back into the on-prem data center at the enterprise, the close work we do with Cisco and with partners like Presidio. I'll give you a perfect example is, when you look at one of the strengths Cisco's had traditionally over the years, it's this developer community. And it was the developer community what seems to have been born in networking and the networking spaces, and it's really created scale for Cisco. Well as you look at the nascent technologies there's two things we see. One is application developers inside of the enterprise IT, don't have a simple way to build applications. So they go do a swipe on AWS. Start a instantiation to write an application, but with things like OpenShift and working with Cisco on a redhat, enterprise easy DevOps platform, or things like container development. We work very closely with Google and GKE on the Kubernetes development and the Kubernetes engine. As well as with Cisco. And then so, when you bring that all together and you say, "Now we have a developer community" "of a technology, which is clearly the future," "which is containers." And Cisco working with Intel, Cisco working with Presidio, Intel working with Presidio, it's really a three legged stool. And how do we refine the capabilities and also help define the future roadmap requirements in order to become, add more value for the customers. >> And I think that's a, just to, you know, piggyback to what Brad said. I think that's a key aspect too, right, is. When you look at our customers when they ask us to come up with stuff. Cisco, Presidio, Intel, we're not shy to make those investments, because there might be customer requirements that are very unique. And it's almost bespoke. That we have to work on those kind of solutions and it's great to have partners that are ready to invest with us and make those investments, and, you know, make those changes. >> Great. Want to give you both a final world. What should we look for going forward? You know, some areas, maybe, that you're pushing new solutions in? You talked about, you know, analytics and the like. >> Yup. >> What should we look for as the partnership continues to grow in the future? >> Yeah so, when you look at Presidio's go to market here, we are focused on three key areas. One is digital infrastructure, multicloud, and then security. And in addition we want to really focus on data analytics and business insights. So, digital infrastructure for us is the whole software defined infrastructure. That's getting more and more automated and orchestrated. Multicloud, you know, you gonna see us make more investments in container technology as well as working with companies like Google and Intel, and the whole GKE, the Google Kubernetes engine. And then in the security part at the end of the day, everything we do has to be secure. It's not about pulling point products, it has to be a full fledged strategy. And then the last thing our customers are asking us is "We've build us this software defined infrastructure," "in a multicloud along with security." "Can you give me business insights?" So this is where we are working very closely with Intel and Cisco on tetration, which is the whole network flow and security analytics that, you know, obviously is powered by the telemetry from Intel CPUs, and you're gonna see us make more investments there with tetration, with you know, obviously app dynamics and companies like, Splunk. So. I think that's what you're gonna see us do a lot in the future. >> Yeah, I think, well said Vinu. And I think at a very basic level, all of this software, all the complexity, all of the security is gonna require more insatiable desire for Compute. But Intel's clearly investing beyond Compute. We're very open about becoming a data centric company, looking at about how this tidal wave of data's coming in a world of billions of connected devices. So as Intel continues to invest, whether it's in FPGAs, storage memory technologies, you know, the blog for the launch of HyperFlex 3.5 just went out, an all NVNe version, of HyperFlex. And then we're gonna talk on Thursday about using Optane, Intel Optane technology as a caching tier. FPGAs, over into silicon photonics technology. There's just a wealth of capabilities in silicon, that Intel's bringing the market to bear. And working with our partners, again like, Presidio to understand. By the way, the way we do business at Intel is, we have an account team that also calls on Presidio. And what we do is, our team triangulates with them. So Presidio is understanding the future roadmap of technologies from Intel at the same time Cisco's understanding it. Cisco then can innovate on platforms based on Intel technologies, but as Presidio knows what's comin' down the pike, they can start building their plans for how they can then take it from Cisco's hands, further encapsulate it in a valuable offering, say cloud in a box as you said so well, and deliver easy business outcomes for the customers. >> Yup. >> Yeah. >> Yeah, absolutely. For a long we watched the tick tock coming out of Intel, as what drove innovation and you know, new advancements in the industry. Now everyone's moving faster, even Intel. You know, it's not the chip itself that is the you know, driving factor of all the change. So, Brad, Vinu, thank you so much for joining us. >> Thank you Stu. >> Absolutely, thank you Stu. >> Thank you so much for having us. >> Really appreciate all the updates and congrats on the progress. >> Thank you. Alright we'll be back here with lots more coverage three days wall to wall coverage of Cisco Live 2018 here in Orlando. I'm Stu Miniman and thanks so much for watching theCUBE. (electronic music)

>> Announcer: Live from Barcelona, Spain, it's the Cube, covering Cisco Live 2018. Brought to you by Cisco, Veeam, and the Cube's ecosystem partners. >> Hello and welcome back to the Cube's exclusive coverage of Cisco Live 2018 in Europe. Kicking off 2018 here in Europe is Cisco's annual event. I'm John Furrier, the cohost of the Cube, with Stu Miniman, analyst at Wikibon. Our next guest is Todd Brannon, who's the marketing director at Cisco, welcome to the Cube. >> Thank you. >> Great, thanks for coming on. >> Absolutely. >> You guys announced HyperFlex before the show. >> We did. >> And a lot of cloud happening here in the keynote. Seeing IOT, well security number one obviously. Security, that's always going to be number one, but the other themes are obviously IOT and multi-cloud. >> Todd: Multi-cloud. >> Huge conversations, both developing rapidly in kind of it's own way. >> Well that's crucial for us 'cause we talk about HyperFlex 3.0, a lot of cool features that we're building into that, but the scope for us is much, much broader because of the multi-cloud piece. That's reality for our customers. They've told us very, very clearly, I'm going to use multiple public clouds, but I'm also going to have to get my on-prem side of it. So we tell 'em, absolutely, good multi-cloud starts at home with platforms like, with HyperFlex, and that's exactly the way we've brought it together. So we talk about a kind of a very modest aspiration with this is we want to help customers power any application, on any cloud, on any scale. >> Well take a minute before we get started, help us with some questions. What is HyperFlex 3.0 for the folks watching? What is it? >> So we introduced HyperFlex as our hyper converged platform built on UCS. We acquired a company called Springpath. They brought in a purpose-built, log-structured file system for the cluster and we combined these things together to create HyperFlex. So it's really unique in the sense that, well let me back up, I'd say a lot people ignore how crucial a file system and a network are to a clustered system. It kind of goes without saying, but a lot of the focus has been on, okay what's the individual node in that stack look like, but we look at it much more at the cluster level. And so, our uniqueness is that we've engineered all of this thing together. So we brought that out in 2016, last year really we focused on performance, 40 gig, all-flash, open up the network pipes and then this year is really about our multi-cloud integration and then additional features that we're bringing in to support more workloads, Hyper-V support, containers. So 3.0 is really just filling in a lot of features that we need to really make this a ideal platform for multi-cloud. >> Todd, we've tracked UCS since the early days. UCS really created and led the whole converged infrastructure ten. >> When we heard about CI though, it's really about simplification. It's infrastructure, it's that next step. Hyper converged, a lot of the things you were talking about there, it's about cloud and the underlying platform, and while CI can be used for that, seems like a different discussion. Can you give us a little bit compare/contrast as to what you see? >> Absolutely. Well, I mean, the conversion infrastructures, you know, we started that way back in the day with Vblock and VCE, and then FlexPod, VersaStack, FlashStack, there's lots of different storage partnerships that we have we can bring customers. And private cloud has been a big workload for those infrastructure components. You know, it's really just a storage question of how you want to address that component, but it all revolves around the operating model. So our mission is, look, we've got a huge install basic customers are used to acquiring and deploying pre-engineered chunks of infrastructure like a Vxblock or a FlexPod, what have you, we need to continue to serve them, while they also evaluate where hyper convergence might fit in the equation as well, and how do we offer those both up with a common set of policy and management, with UCS management, with Intersight. So we think that these are going to coexist for quite some time and customers are going to have to decide how they want to use those different types of infrastructure, but ultimately, it's just about the workload. >> Cisco and it's storage partners have billions of reasons why they're going to keep selling CI's for a while. >> Certainly, yep. >> Help connect the dots though. You talked about that operating model in the keynote this morning, big focus on multi-cloud, >> Todd: Certainly. >> And things like, we talked to AppD at AWS re:Invent, how does the public cloud mesh with these other solutions. >> So, one of the things that we're announcing here at the show is the cloud, our Cisco container platform. That's an example of how we're going to work with Google to create an integrated stack, focused initially around Kubernetes, and we have HyperFlex as an infrastructure component under that, and that's, for people that are really accelerating their application development or maybe they're modernizing older workloads with containers, we're going to provide that element. But the true multi-cloud functionality is what we do with things like CloudCenter. So that was our CliQr acquisition, allows us to profile workloads, take 'em out to the cloud, multiple public clouds. So for us, when we talk about HyperFlex as a platform for multi-cloud it's those integrations with CloudCenter, but then also AppD, which is hugely important because like we were talking about earlier, you've got applications now that are distributed across on-prem and multiple public clouds potentially. So maybe you got a front end out in the public cloud, customer data or business logic on-prem, how do you keep track of the performance of that collection of functions and systems that are running independently and you have to do that with something like AppD. So we have a lot of the software components to help customers really get their multi-cloud going. >> So bringing it back to HyperFlex, my understanding, not just virtual environment anymore, you're also doing containers and that tied into that multi-cloud piece. >> So, a couple important things with this 3.0 release. We're bringing for Hyper-V, for customers who want to do different hypervisors, and then we developed a persistent storage plug-in into the file system for those stateful workloads that are going to be in containers. So again, with Kubernetes, as developers want to go out and do pod requests, basically self-service volumes on the HyperFlex storage environment, that's huge. And so we've opened it up to two more classes of workloads right there. >> I mean, what aren't you doing? Got these centralized apps. Is there going to be a Cisco coin in the future? (laughs) >> I think -- >> There's a rumor going around. >> So yeah, I can't speak to our cryptocurrency strategy. That's out of my domain. >> Probably coming, these centralized apps, again, on the horizon, another future thing you guys are positioned for. In all seriousness though, I want to put a plug in for Stu's Wikibon team. They came out with a true private cloud report recently last year, really kind of the only ones looking at it this way, but it really is interesting. I want to get your comment to this because we go to 100 of events a year, last year was over 100, I think, 30, and what we've observed is the same thing that's happening here. DevNet's got a lot of attraction. You've got DevNet Create, more of an open-source, cloud native focus. >> Todd: Sure. >> You're seeing the enterprises getting their act done at home, inside the premise. >> Todd: That's right. >> So it's not so much they're moving to cloud. Yeah, some stuff's going in the cloud, but they're kind of cleaning up the house first, going cloud ops on premise. >> That's right. >> And then, as a preparation to all the spend and all the intention is really on the private cloud, what they call true private cloud. Do you see the same thing? >> Absolutely. >> And is that a stepping stone to the cloud? >> Absolutely, and that's exactly, that's informed everything we've done here in this latest, this past year really, of development around HyperFlex is our IT customers telling us, look I've got the developer as my new constituent. As much as I need to maintain shrink wrapped apps or legacy workloads for the core business, the developer is really my customer now and I have to provide infrastructure on-prem that behaves like the cloud in terms of infrastructure as code and being able to do things like we're doing with this Kubernetes environment, where the developers can withdraw the resources they need, turn 'em back in and the IT team can get out of the way. That's hugely important. >> I think we're observing on our opening this morning when we were commenting on the keynote and some of the trends here is that Cisco is moving up the stack pretty rapidly over the years, this year more than ever, you can start to see a clear line of sight that it's not just network plumbing, although that's pretty critical. But with Kubernetes and the growth, you mentioned Google, it's pretty interesting, a renaissance is going on in the software world, certainly with open-source, you have app developers, which are like just classic building software apps, then you got engineering, software engineering. So I use that that term software engineering as a throwback to the age when I graduated with my CS degree, that was what you called yourself when you got a job. You were a software engineer. You have network engineers, so you're seeing a line of under the hood engineering with software and networks and whatnot. And then, above Kubernetes you're seeing, just hey I just want a program, just give me some functions. >> Absolutely, and it's the IT generalist that are emerging as the heroes here that have to understand, okay, how do I build that on-prem platform, how do I have the capability to get my developers out to the public cloud, as in when they need to and it makes sense, or potentially bring things back. And you're right, and then on the development side they don't want to have to worry about the mechanics of that. So to the degree we can enable our IT customer to provide that service, but also simplify that for them is essential. >> Talk about your posture to those two different personas because you guys just provide the network in the old days and app developers programmed on them. They get some storage or perusing some storage. Now you got to lean in towards the network engineers, which are now software engineers under the hood, and then you got to lean in to the app developers and enable them to be successful. How are you attacking those, not attacking, how are you servicing and leaning into those groups. >> We brought the storage and computing experts into the fold with UCS, nine years ago, but now when you look at our acquisition of AppD, that's where we really start to take care of the application owner, be it the developer or the business owner for the application and allowing them to kind of see across on-prem, out in the public cloud, how do I ensure that I'm going to stay out of trouble, and if something goes wrong I know exactly where in that constellation of services the problem resides. So AppD is critical in that sense because -- >> So they fill a big hole. >> Absolutely, because that's how we can, all this comes together to power our workload, power business service. Applications are the heart of new business. >> Todd, what about from a training perspective? Cisco Live's always been a show where people get their certifications, they build their careers on this stuff. It's changing so fast. How are you keeping, the training tracks, and giving that career help to all the people that do this for a living. >> We're adding the pillars for all the things we're talking about, the multi-cloud software portfolio, new infrastructure components, like HyperFlex. Those are all being built into our training regimen and also our training partners, so they can take that out and scale it for us. >> All right, so you went and just connected the dots on what I was finishing up for network engineers, software engineers, under the hood, app developers, AppD, you guys have a good solid footing there, good approach. Multi-cloud, is that the Kubernetes? Is that the secret sauce to multi-cloud in your opinion? And/or how do you guys look at multi-cloud and how do you talk to your customers about it? >> Well we talk about, the data is pretty clear, customers want to be able to use multiple public clouds and they want to be able to evaluate them. So I think the center of our strategy, we have our multi-cloud portfolio, how we organize all these things. The cloud consume pillar of that is really comprised of AppD, which we talked about, but also CloudCenter. And so CloudCenter is a tool that allows our customers basically profile an application and then go understand what's it going to cost me and what are the different attributes of these public cloud services, and which one matches up the best. So I'd say that's the center of the strategy. Obviously, particularly around containers, but more workloads in the future, Kubernetes becomes a much bigger -- >> So orchestration is pretty key. >> Yeah, orchestration's essential and it's not just in a pure software context, but how do we hook down into infrastructure. So we've already built this programmable infrastructure, so how do we expose those knobs and dials to orchestration engines so that we're not just virtualizing, but we're actually optimizing the infrastructure they need. >> That's the beautiful thing about service and function-based software. Okay, so now I've heard about this dCloud. What is dCloud? >> So dCloud's basically a demo environment that our engineering team can use and our partners can use to demo software. So, for example, we launched our cloud management platform for UCS and HyperFlex last fall, we call it Intersight. So software like that, you know software becomes central to our strategy, dCloud becomes the way that we show that. >> Customers can come in and play on that and partners? >> Partners and our sales teams can take customers through it. >> But not customers. >> I don't believe there's an end user entrance to that yet. >> So it's like a sandbox for the cloud. >> But I could be wrong. I'm not a dCloub expert. >> So for the folks watching, what's different this year at Cisco Live in Europe from other shows? Is there anything that stands out to you around this year? >> Definitely the multi-cloud theme and we're hearing that from customers. They don't, there's always been the question of what type of infrastructure should I provision for different workloads, but it's really moved that past that to here's the workload spectrum I need to support. What are the tools you're going to give me for that on-prem? How can you help me get to the cloud? And I think the other thing, more narrowly speaking, hyper convergence is really turning the corner in terms of adoption. So when we first, we weren't the first ones to arrive at the hyper convergence party in the industry by any means, but we brought the keg. So when we showed up the party kind of got started. We think we brought the complete answer and now we're seeing as more and more workloads can go onto a HCI platform, the adoption's starting to, and we're seeing large organizations bring it on, both in the core and out at the edge. So those are a couple big changes -- >> Todd, any bold predictions? Will Cisco be number three in HCI by the end of 2018? >> Todd: Yes, 'cause we already are. >> Okay. (laughs) >> We already are. So, today it's a three horse race right now. So it's Dell, Nutanix, Cisco in the latest IDC numbers. So I think by the end, I'd like to see number two within a type of a timeframe. I'll give you number two within six quarters, how about that? >> And Stu wants to know what are you going to do with all that cash that you bring over from, to the US? (laughs) >> John: What are you going to buy? >> Your patriotion, yeah. >> I heard Chuck talking about investing in employees so I hope to get some of that, or no. No guys, I think Chuck's already kind of laid it out. We got our investors, we've got potential things we can do, bringing in new technology, so he's really laid that out. >> Todd, final question for you at the end of the segment. >> Sure. >> As the personnel change, excitedly, the infrastructure of the cloud and the evolution of the renaissance that's coming with software, DevNet, DevNet Create, doing some great stuff as an indicator of what's coming, >> Sure. >> How is the roll of the network, your target customer, who's been loyal Cisco net MVP all these years and you got storage guys, interdisciplinary has been a big thing, what skill sets do you see evolving for that Cisco hero out there? What the trend that you can talk to? >> It's the ability to automate. It's the ability to take advantage of some of the technologies we're bringing in terms of assurance. It's how do you bring all of that insight that resides in the network, in the telemetry and that data, how do you bring that out and use it in a way that can help the business. I think for our core audience, for those folks you talk about, it's how do I become much more adept at bringing these pieces together in an automated way, but then how do take advantage of some of the things that are available to me now in terms of bringing the power of analytics, AI, into an IT context and take advantage of those things for all the different things you can imagine, security, assurance, et cetera. >> So the big thing then, just to summarize, if I hear you correctly, the difference this year is that you got AppD, and you got end to end DevOps. >> I think it's our multi-cloud story has really jelled over the past year, and now we're bring it in to the context of on-prem infrastructure in addition to the public cloud side of it, so I think that's the, that's big news from data center side. >> Todd Brannon who's the marketing director at Cisco here inside the Cube. We are in Barcelona, live coverage, two days, wall to wall. I'm John Furrier for Stu Miniman. More live coverage at the Cube after this short break. (synthesizer beat)

>> Announcer: From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now, here are your hosts, Dave Vellante and Stu Miniman. >> 2010 was the first year we brought theCUBE to VMworld. At that time, VMware was a $2.5 billion company with former Microsoft exec Paul Maritz at the helm. Two years earlier, in a stunning development, VMware fired co-founder and CEO Diane Greene, which sent the company's stock tumbling almost 25%. Under pressure from investors, Joe Tucci, the chairman of EMC, made the move after a rocky four-year relationship with Ms. Greene. EMC purchased VMware in 2004 for $635 million. The Maritz years were marked by a strategy to move the company beyond the hypervisor into new areas of growth, including desktop virtualization and applications, which were met with mixed market responses. To Maritz's credit, however, the company continued to expand its presence in the data center, and under his leadership remained highly competitive with Microsoft, who was seen at the time as VMware's main rival. In 2012, the company named long-time Intel and then recently EMC exec, Pat Gelsinger as its CEO. Gelsinger inherited a roughly $4.5 billion company, staring into the teeth of the oncoming cloud megatrend. Gelsinger quickly embarked on a strategy to refocus on the core business, buoyed by a restructuring of many of the VMware assets that EMC and VMware folded into a new company called Pivotal. Gelsinger made several attempts to maintain and expand VMware's total available market with a public cloud play called vCloud Air, which ultimately failed. On the plus side of the ledger, however, Gelsinger led VMware's software-defined data center strategy grabbing pieces of its value chain that were historically left for the ecosystem. Of course, the most notable being NSX, the company's software-defined networking product, and vSan, a software storage play. Fast forward to 2017, and add to these developments the momentum of VMware's cloud management and orchestration offerings, its security and other multi-cloud services, and you now have a nearly $8 billion revenue company growing at 10% per anum, with a $40 billion market cap, and a new owner, namely, Michael Dell and company. Hello, everyone. My name is Dave Vellante and I'm here with Stu Miniman, and this is our VMworld 2017 preview. Stu, thanks for joining me. >> Dave, can't believe it's bene eight years we've been doing theCUBE at VMworld. >> Right, and we have been tracking this, Stu, and now, as we were saying, we see new owners, Michael Dell, Dell buying EMC, and of course VMware maintaining the vast majority of the ownership. Stu, what has changed since Michael Dell purchased VMware? What's changed in terms of Dell, its ownership, and also in the past year? >> Yeah, so it's been one of the top questions. Last year, John Furrier and I interviewed Michael Dell, and there were still everybody trying to say after the acquisition happened, "Aren't you going to just sell of VMware because VMware "needs to be independent, "they need to be able to partner with everyone?" And Michael was basically like, just lit a fire underneath him, and he's like, "People that think I'm going to sell it "don't understand the business plan "and they don't understand math." Everybody thought, "Oh, you got to sell them off "to be able to pay down the debt," and he's like, "No. "VMware has been called the jewel of this acquisition "of EMC, the largest acquisition in tech history." And that relationship of VMware is something that's still playing out. One piece of it, you mentioned vSAN, one of the success stories, there was the failure of EVO:RAIL, which was kind of the first generation solution put together sold through a whole lot of partners. They took that whole product and marketing team and put them together with EMC and created the VxRail team, which now reports up to Chad Sakac. On the Dell/EMC side, VxRail doing quite well, vSAN doing phenomenally well. They claim to have the most number of customers for any product in the hyper-converged infrastructure space. Lots of different solutions out there. So, some of that blending of how Dell/EMC and VMware, we see a little bit of that, but still, VMware partners with everyone. VMworld, still, Dave, is probably the largest infrastructure ecosystem out there, and even if we look at cloud, it's one of the more robust ecosystems out there. The only one probably rivals it these days is Amazon. >> Stu, isn't Dell's ownership of VMware somewhat more threatening to server vendors in particular than EMCs? Especially Cisco, IBM, HPE, large volume movers of VMware licenses, how has that affected the dynamic in the ecosystem? >> Yeah, Dave, we've talked in previous years. I was at EMC back at the beginning of the VMware relationship. EMC really didn't know what it was getting when it got VMware. It was less dollars were going to go into servers because we consolidate with virtualization, and less dollars to servers should mean more dollars to storage, good for EMC. Well, Dell, number one thing that Michael Dell wants to do is sell Dell servers. So, of course, if I'm someone else in that ecosystem, if I'm selling other servers, if I'm selling storage that doesn't run on Dell gear and not part of that Dell ecosystem, absolutely it could be a threat. Micheal has maintained the they're going to keep VMware, allow them to have their independence, and I haven't heard too many rumblings from the ecosystem that they've messed up the apple cart from VMware's standpoint. >> Okay, last year the talk was that Pat Gelsinger was on his way out. >> Stu Miniman: Yeah. >> You see Pat Gelsinger doesn't appear to be on his way out. There's earnings momentum, which we'll talk about, but thoughts on management? >> Yeah, so, right, Dave. Number one thing is we thought Pat would be out. Things are doing better from a stock market. You talked about the growth, 10% per anum right now is solid VMware. We've seen a number of moves and changes, people that, there have been a lot of people that have left. There's new people that have come in. There are areas that are doing quite well, and virtualization is still a mainstay of the data center. One of the things we'll talk about, I know, is that Amazon relationship, which we expect to hear a lot about at the show. Amazon's one of the Global Diamond partners, which, a year ago if you had said that Amazon was one of the top partners up there with the likes of Hewlett Packard Enterprise, OVH took over the vCloud Air business, which is, as you said, it failed from VMware's standpoint. They still have a number of partners. Companies like Rackspace, OVH that took over that vCloud Air business, and lots of service providers are doing quite well selling VMware lots of places. And virtualization still is the foundational layer for most infrastructure. >> So VMware pre-announced earnings to the upside and future growth ahead of expectations, so the stock got a nice pop out of that. What's driving that momentum? >> The two areas you talked about first. vSAN is doing quite well. It's driving a lot of adoption and trying to get VMware to be a little bit more sticky and really kind of slowly expand as opposed to big chunks. We talked about when Pat first went in as CEO, it was, VMware had to play a similar game to what Intel did, Dave, which is how do they expand what they're doing without really ostracizing their ecosystem. And, to their credit, they've done a pretty good job of that. They baked in some backup solutions, but lots of backup solutions, you and I were at the vMon conference earlier this year. VM's still doing a very solid business inside of VMware's ecosystem. Lots of other players that play well there. NSX is really starting to hit its stride, that networking piece, but where a few years ago we were talking about it was VMware versus Cisco, well, they seem to be kind of settling into their swim lanes. Cisco still has their core networking business. Cisco's trying to become more of a software company. Cisco actually recently bought Springpath, which was their hyper-converged product, but today that's far behind what vSAN's doing, revenue, users, and everything like that. AirWatch was another acquisition. Sanjay Poonen really helped drive that forward. So the mobility play, VMware's doing well. A lot of the emerging areas, we've been waiting to see where VMware goes with them. Things that I look at like containerization, server lists, open stack VMware had some plays there. They are really kind of nascent at this point and haven't really exploded. I always look at this show, are we seeing many developers there? Lots of the shows we go to have a big developer group. We'll have a little bit of developers, but it's really still a small piece of the overall picture. There's still lots of virtualization admins, people looking at where VMware fits into cloud, and that's kind of where it sits today. >> Let's talk about the competitive dynamic, which is totally different. I mean, back when we first started covering VMworld with theCUBE, 2010, it was really Citrix, Microsoft, Citrix with VDI. You mentioned AirWatch, which kind of flipped the dynamic a little bit. Quite a bit, actually. But Microsoft was the key virtualization competitor. Now it's like competitors, partners, you've got Google Cloud, now, of course, Diane Greene running Google Cloud, which is kind of ironic. We can talk about that. Microsoft with Azure, AWS, which is, we expect to hear a lot from VMware at VMworld 2017 about the AWS relationship. Certainly, IBM with its cloud. Nutanix, which launched at VMworld several years ago, is now more competitive. You mentioned Cisco. They're clearly more competitive with NSX. How do you describe the competitive landscape? What should we be watching at this year's show? >> Yeah, Dave, first of all, you talked about how VMware grew from kind of the $2.5 billion to more like an $8 billion, so of course they're bumping into, kind of going over some of their swim lanes a little bit, and the market has matured. Absolutely, hyper convergence for the last few years has been one of the hot spots, not only for VMware, first when they launched vSAN, it actually was the tide that rose for a lot of their competitors out there. Nutanix, SimpliVity, many of these companies said that they actually stopped a lot of their outbound marketing for about a year because all the people that called up looking at vSAN went to those solutions. Now vSAN's hitting its stride. It's doing really well. I highlighted how VxRail is doing great revenue on the Dell/EMC side, and there's still lots of partners that VMware has. So hyper converge, absolutely something that we'll see there. Cloud, big piece. I mentioned Rackspace, OVH, all the service providers. The vCloud Air network is still kind of there. So how VMware is getting into the service providers, how they're getting into the cloud, I know we'll talk a little bit more about the cloud piece. Last year it was the Cloud Foundation suite, which takes vSAN, and NSX, and vSphere, puts it all together with a management, and that's something that VMware wants to be able to put on prem in a service provider or in AWS. So really, wherever you go, VMware is going to be there and stretch that, but it's like a four-node star configuration. It doesn't natively go into Amazon. That's been a lot of the lift that's been happening over the last year to try to get that VMware on AWS working, and I hear it's not 100% baked yet by the time we get to the show, but working out a lot of those details. But cloud, hyper-converged, some of the new ones. VDI will still come up too, I'm sure. >> How about Docker? Where do they fit in the competitive landscape? >> Yeah, it's interest, remember, I remember the last year we had the show in San Francisco we had Ben Golub, a CEO at Docker, on the program there. Ben's no longer the CEO. They switched CEO's. We had theCUBE at DockerCon this year. Containers, absolutely very important. VMware has something called VMware Integrated Containers. I hear a little bit about it, but most people, if they're saying, "I'm doing virtualization," they're probably doing it on Linux. So Red Hat Summit this year, heard a lot about containers. We're going to have theCUBE at Kubecon, which is the Kubernetes show, later this year. So we know VMware plays a little bit with Docker. I'd love to see VMware saying how they fit into the Kubernetes piece a little bit more. We heard of the Cloud Foundry Summit earlier this year, how Pivotal kind of fits into that environment and they've got a way to be able to spread across multiple environments there. But VMware tends to play in a little bit more traditional applications. And, Dave, when you talk about a competitive standpoint, that's what I look at for VMware. The biggest threat to them is they don't own the application, so Microsoft, Oracle, IBM, and all those cloud-native apps that are getting put in the public cloud, like Google, and Amazon, and Microsoft, does that leave VMware behind? Does VMware, I heard it many times last year, become the new Legacy? >> Well, and, but they're clearly positioned as an infrastructure player, so let's talk about that. I mean, cloud has become the new, infrastructure and service, become the new big competitive threat to on-prem infrastructure. Wikibon has done some research on the true private cloud. Interestingly, I mean, true private cloud essentially is a moniker representation of public cloud-like attributes on prem, bringing cloud, cloud models, to the data, for example, and Wikibon has forecast that as the largest market. I think I've got some data here. It shows that true private cloud over time will be a $230 billion market, whereas infrastructures and service in the public cloud will be about 150 billion. So you expect that true private cloud is going to overtake that. It's growing faster. The CAG here is 33% versus public IAS at 15%, but the big thing is staff. >> Yeah. >> Staffing, getting taken out essentially, getting out of non-differentiated heavy lifting, but what is VMware's cloud strategy generally, but specifically with regard to bringing the cloud model to the data on prem? >> Yeah, so when we created the true private cloud definition, we said,"Vvirtualization alone is not cloud, "and therefore, what do we need? "We really need to have that automation, "that orchestration." And VMware had done a number of acquisitions, they're putting the suite of solutions together, and it's more than just saying, "Oh, I have six different software products; "here's a bundle." How do we fully integrate that? And that's what the Cloud Foundation suite's what VMware put together so that I can have it in a virtual private cloud in Amazon. And it's something basically VMware manages it, but it's Amazon's data center, and that's plugged into the public clouds. I can do the similar sort of thing in the service providers and that's why, with our forecast, Dave, we show in about five years, true private cloud should have more revenue than public cloud. Big reason is because there's a whole lot of Legacy out there and moving from all of my, most companies hundreds if not thousands of applications, getting all of them to the public cloud is tough. Having them in a virtualized environment and being able to slide them over to this kind of environment makes a lot of sense. I can do that. And the shift of my workloads and my applications going to microservices really starting to break apart some of the the pieces is something that a lot of times that's going to take five to 10 years. So, in the meantime, we're going to shift kind of Legacy to private cloud while we're picking off the things that we can with the public cloud. And VMware with their Cloud Foundation suite and their solutions that they're putting together, networking as, really, the inter fabric with NSX, vSAN making it easy to make those applications a little bit more portable between different types of infrastructure, but that's really, VMware is they put their cloud play, and they have a very large set of partners that they're working with in this space. >> So, Stu, how should we look at the VMware AWS deal? Is it AWS's attempt to get a piece of the true private cloud action on prem? Is it VMware's initiative to try to actually get a cloud strategy that has teeth, and works, and has longevity? How should we think about that? >> Yeah, it's, of course, a little bit of both. At its core, I think it's Amazon looks at 500,000 VMware customers that have data center deployments and they're going to stick a straw into that environment and say, "Come try out the first taste of our services," and once you get on the Amazon services which, by the way, they're launching, what, three new features every week, I think. I was at the Amazon Summit in New York City recently and it was like, "Oh, it's a regional summit," there were like three main announcements. No, I got the email. There were like 12 announcements and each one of them were kind of cool and things like that. So it absolutely is how do I get customers comfortable with moving to this new model. I think one of the things that Microsoft did really well is when they pushed everybody to Office 365, they said, "SaaS is the way you should always think "about buying your applications going forward, not, "I'm going to deploy a server for my Outlook, "I'm going to deploy infrastructure for my SharePoint." It's, "I'm going to buy Office 365 and that's just "the way it's done." So they made it the okay. Now VMware, it's really dangerous, in a way, saying, working with Amazon, now we're saying, "Hey, playing on Amazon's safe. "The water's nice." And once they get in that water and you have access to all of those cool things that Amazon keeps putting out, which, by the way, Dave, the week after they announced the partnership of VMware and AWS, what Amazon announced was, "There's a really easy "migration service that, if you have "a VMware Ware environment, "you just kind of click this button." And I'm pretty sure it's for free. "You can now be completely on AWS "and you don't have to pay for VMware licensing anymore. "Wouldn't that be nice?" >> So, okay, so the way you've phrased it or framed it, is it sounds like that VMware, with its half a million customers, has more to lose than AWS in this deal. Is that the right way to think about it or is this not a zero-sum game? >> I don't think it's a zero-sum game when, you brought up the true private cloud. The data center still, there's room for some growth with VMware, even if people are 90% virtualized now, there's some room for growth there. Public cloud, though, has a strong growth engine, so now VMware has a play there. Rather than saying, "It's the book seller, don't go there," they want to have a play. Michael Dell, Dave, I'm sure we're going to ask him, say, "Hey, what do you think the world's going to look like "in five years? "You've got your Azure Stack partnership "that you're lining up with your server division "and with EMC, you've got Amazon that VMware's playing with, "you've got your data center; "how does that go?" And, of course, Michael being the smart businessman that he is, is going to say, "Uh, yeah, you're going to buy Dell "no matter what solution you go with, "and I'm going to have a strong position "in all of them." but it definitely is, we're in a bit of a transitional phase as to how this is going to look. We've, for years, been arguing how big does public cloud get, what applications go where. I do think that this has the potential to accelerate a little bit from VMware's standpoint. VMware customers getting in this environment, trying out some of the new things. I know lots of people that were in the virtualization community that are now playing in the public cloud, getting certified, doing the same things that they did a decade ago to get on public cloud. So, as those armies of certified people kind of move over in the skillset, we have a generational shift going on and lots of people are going to be like, "Hey, I don't want to spend 12 to 18 months "building a temple for my data anymore. "I can just spin this up really fast and move." It's interesting, Dave, Cycle Computing, one of the earliest customers that we interviewed at Amazon, was just acquired by one of the other cloud guys, not Amazon. So companies that know, that was an HPC company that was, rather than spend 18 months and $10 million, we can do the same thing in, like, a few weeks and $10,000. >> They're super computing in the cloud. All right, let's wrap with what to expect at VMworld 2017. Obviously it's going to be a lot of people there. They're your peeps. A lot of partying going on. It's like, it used to be Labor Day kicked off the fall selling season, and for years it's been VMworld. What should we look for this year? >> Yeah, so, I'm excited, Dave. It's always, this community, they spend like the whole summer getting ready for it. I'm actually going to be sitting on a panel at Opening Acts, which is, the VMunderground group does on Sunday. So the event really, it doesn't start Monday, Dave, it actually, a lot of people are already flying in by the time this video goes up. They're doing things Saturday. On Sunday there's three panels. I'm sitting on one on buzz words in IT, so to things like cloud and server lists. Are those meaningful or are those a total waste of our time? So that kind of gets us started. You mentioned lot of good parties at the show always. There's the vExpert community. I was a vExpert for a number of years back when it was, you know, hundred, couple hundred people. I think there's now 1,500 vExperts worldwide. We've got a bunch of hosts coming in to help us, including John Troyer who created the vExpert program, Keith Townsend, Justin Warren, excited to have them. Lisa Martin's going to be co-hosting, along with you, me, John Furrier and Peter Burris. So we've got a big team. We've got two sets. We've got a great lineup at theCUBE. Two sets, three days in the VMvillage, which this year is on the first floor right outside of the Expo Hall. So it's one of those things I don't expect to sleep a lot. I expect to see a lot of people, bump into 'em on the show floor, stop by theCUBE, see the parties, and definitely see 'em in the after parties. >> Great. Well, as Stu says, we have two sets going on, so please stop by and see us. Stu, thanks very much for helping me with this VMworld preview. We'll see you in Vegas next week. Thanks for watching, everybody. See you in Las Vegas. This is theCUBE. (electronic music)