[Announcer] - Live from Washington D.C., it's theCUBE, covering .NEXT Conference brought to you by Nutanix. >> We're back in D.C., welcome to NextConf, this is day two of our wall-to-wall coverage and this is theCUBE, the leader in live tech coverage. My name is Dave Vellante with Stu Miniman. Dheeraj Pandey is here, he's the chairman and CEO of Nutanix. Long time CUBE alum. Great to see you again. >> Pleasure. >> So you know, I love your style, up on stage yesterday. Very philosophical, always have been humble. You sort of said, "I'm going to stay humble," and it appears that's the case. But yet, there's so much excitement around here, you have a lot to be very proud of. How do you feel? >> You know, there's no finish line in this company building, just like there's no finish line when you have a family, it never ends actually. Nutanix is a family, and we are trying to make it a bigger, happier family with more customers, more partners, more employees. I feel good, but I think this company is good right now, it's not a great company. We probably will have to spend another decade to make it a great company actually, so. >> How do you, as the chairman and CEO, how do you define "great company"? >> Great companies, for one, actually take really good care of their stakeholders. You think about employees and customers and partners and also Wall Street, so I think at the end of the day we have barely begun the journey in some of these things. Customers, sure, we have quite a few of them, but I think we can do so much more for them. At some level, even in the largest accounts, we're barely scratching the surface actually. Same thing with employees, you know, we have almost 3000 employees but still, we could do so much more for them as well in terms of wealth creation, in terms of building careers. Very early days. Same thing with Wall Street as well, very early days actually. >> Dheeraj, you're always opening to listening to feedback, but you mentioned, you've now got a lot of constituencies. I know I've interviewed you and said well you know, there's the 90-day shock clock but, we can't get distracted, we need to focus. How do you, you know, what is the filter, how do you, what do you take in and internalize to translate into the direction of the company? >> You know I talk about two things. There's delight, there's waste. Delight for main street and make sure you're cognizant of the waste with Wall Street, because if you keep growing they won't bother you. What they bother you with is waste. How are you growing, what does efficiency look like at scale? So I just learn "growth at any cost". I think these are all timely reminders for any company, so that it doesn't get too painful when recessions hit you, because there's highs and lows of any company that you have to go through. So I believe that waste is the larger ego of delight, and if you can do a really good job of delighting our customers, our partners, our employees and then figure out how to deal with all of this with waste in mind, I think we'll do a pretty good job. So what matters the most is delight, but not without figuring out what's waste-like. I think you have to keep looking at these "KPIs" and say how are we really doing at scale with respect to distribution, marketing, product development, product engineering. Now we have a pretty large engineering workforce as well. How can the company be delightful for them if you don't have "two-pizza teams", if you don't have APIs and microservices in which they actually talk to each other, still feel like they're the CTO of their company, because they all want to make independent decisions and design trade-offs and things of that nature. I think we talk about this thing which is a really important abstract thing, it's called the paradox of growth. I learned this from some of these folks who have done this book called The Founder's Mentality. Growth creates complexity and complexity kills growth, so just be aware of what you really vied for can kill you as well, and continue to release complexity to organizations in the way you deal with your customers, and I think those are the things that really matter. I look at employees as customers, I look at customers as customers, I look at partners as customers. If you have the customer-centric view, you'll probably continue to simplify things under the cover. >> One of the things that you see in great companies is early on they're able to articulate a vision, see that vision, execute on it obviously and continue to grow their team, I mean that's a big part of your job. You've dramatically, well first of all, the team that you started with was quite large. Cloud expands that enormously. So maybe talk about your vision and how you're seeing that through. >> Well I think from very early on, the mission was invisible infrastructure. And that is an infinite mission because again, no finish line actually. You can make things invisible and then probably say we still aren't invisible enough and you have to make it more invisible. When you have downer to four clicks you have to say how about three and two and one click? And finally get rid of the click because machine learning can come in and automate more things as well. So how more and more things go from humans to machines and how the human-man-machine interface becomes less frictioned is the vision of this company. Now, all of this is not just graphical UI because the systems have to work, they have to be scalable, stable, reliable, available. So the back-end has to be very robust but then without a front-end it's really the same as a man-machine interface. Also the machine-machine interface, because APIs match for a lot as well, you know. If you're only thinking about man-machine, then you've lost a lot of this automation and machine learning capability as well, actually. >> I think back to some of our earliest conversations, you always talked about Nutanix is a software company and the challenge of our day is building distributed systems. The tooling and the way we build things today are very different from when you started the company. If you were starting from a bare sheet today, would you be born in the cloud, you know, how would things like containers and microservices change the way, or, and how are you taking from where you are today, which it started out in virtualization, is that a core, you've got AHV driving a lot of the pieces, versus some of those who are models? >> Yeah, I mean, look, VMware was building an operating system, but they needed a shield of EMC to go sell and distribute that. We had the compute virtualization piece that came a little bit later, but the storage virtualization, the control plane pieces, we needed to shield them, and we shield them in appliance, and that became our form factor the could give us the control of our own destiny, and that's what the appliance did to us. But you always knew you were building software, actually. And many people told us early on, just don't build appliances at all, and we would've been killed, we probably would have to sell this company early on, because it's really hard to build an OS company early on when you don't have a brand and nobody's willing to support you and customers are like, you know, if nobody else is willing to support you, how do you really build an operating system, actually? So I think if there's a method to the madness, we always knew we had to be hardware-agnostic, that's why we never built NVRAMs and FBGAs and things like that. And over time when Dell came forward and said look, you should OEM your product, I think it was a very natural decision for us two and a half, three years ago. I think there's been this controlled release of goodness of this operating system that basically not mean like oh we never thought about it, we always thought about hardware-agnosticism, hypervisor-agnosticism, all those things were there from day one in this company. But you know the question of whether we would start in the cloud today? Honestly, all companies have to start where they are in order to make money, and continue to navigate the shifting sands of time actually. I mean, you sell books, then realize it's not good enough, you go and sell, you know goods with e-commerce, and that's not good enough, you sell computing. We started an office productivity company, go and do a desktop operating system, then you go and do databases and server operating system and then all sorts of things for the family room and so on and then finally do a cloud. I think there's no, you know, change is the only constant you know, if you were to think about it, and companies that actually survive and thrive, they start someplace, and their thing, every three, four years, you just find the adjacencies, and keep navigating, you know, how the market is actually shifting and changing. >> There's a strange aura around your company. Now maybe it's the allure of the product, I don't know, but you have a lot of companies now coming into this ecosystem. We have Chad on next from Dell EMC, you know, arguably one of your larger competitors, okay, but they're here and they're happy to be here. So, it's, I say, maybe it's product, but it's also part cultural. And I'm guessing that your philosophy is it can't be a zero sum game. It's got to be a win-win for the partner, so I wonder if you could add any color to that. >> Yeah, that's a great point by the way, bring up this idea that you can be all things to all people. Somebody asked me in this analyst meetup, how about just go and build a firewall? We can, there's too deep a space in there for us to go build everything, so we need to have open APIs, where others also make money. And by the way, when you have a really flourishing ecosystem, the word of mouth, that they're also making money, the word builds a larger ecosystem, a larger operating system and so on. That's what Apple 2.0 was, because in 1.0 they were all about it's me, it's mine, no one else can do anything, and then they saw Microsoft, and how it was really building this burgeoning ecosystem with APIs, APIs, and more APIs. 90 was Microsoft's decade because of APIs actually, and partners and ecosystems, and Apple learned from them by the way, so when they came out and said we built a device, they said no no no, we've also got to build iTunes, because that's ecosystem, and then they built iCloud and app store and things like that. So I think there are lessons galore in the last 20, 25 years where if you're not a good API-driven company, you're probably not a long-lasting company actually. And the idea of a platform is incomplete without those APIs and the ecosystem itself. >> There's a change in accountant coming which is going to make you, I guess, to restate the software that you've sold through the OEMs will probably have Wall Street look at you a little bit differently. We've talked in the past before about how much you want to sell as Nutanix, how much you want to sell with partners. What's that mix that you see today going forward? How much of your product will you see, hardware, software, services, what's a good mix for you? >> Yeah, I think it's a, it's a good opportunity for the company to really think about revenue 2.0, because revenue 1.0 was what we had sort of planned out four, five years ago and 2.0 is a time when we have different form factors. We have ELAs that we started doing in the last 12 months. We're selling software in CISCO and now software in HP. Obviously Zai will happen in subscription as well. Now we have markable routes to market, you know, obviously the OEMs have actually matured, both OEMs have matured. So the question is of how do we really make it simple one more time? Because obviously there's more routes to market, so as a company we're saying now we can sell more software, and with a new accounting change, which is called ASC 606, software will have to be recognized in the same quarter, we can't defer it arbitrarily. And in some ways it's a good thing, in some ways it's bad because it takes away our goodness of the waterfall, because we could have deferred more revenue, as a company we've deferred a lot, I mean, folks know we have about $465,000,000 of deferred revenue right now, because of how good we were in actually postponing this instant gratification of cutted quarter and so on. So I think some of that will have to be brought into the current quarter but in some sense it's a good thing because we can then take the gross margin of that software and sell more appliances, so I think there's some mixing that'll happen with different margin profiles that'll have to come and kind of work with each other to say can we still grow as a company beyond a billion. >> But these are income statement gymnastics, not that you're playing, but that you're able to- >> Well, there's something about guard rails of the gross margin, because Amazon, what did Amazon say, look, your gross margin, my opportunity, right? So if you just let unbridled software go and sell itself, then our gross margins will be starting to creep up, but what if you kept it within the guard rails of around 60%, and then went and sold more appliances, because the software gave us the luxury to buy growth? I think those are the kind of architectures we are actually looking at right now. >> And the knobs that you might choose to turn, but it will have an impact on the income statement from an operating profit standpoint, I mean, right? If you're going to recognize all that deferred revenue up front you know- >> Just in subscription, we can actually do one-year terms and things like that, but obviously we don't want to completely throw the baby out of the bathwater, because a lot of subscription is a good thing, and Zai will provide subscription. Hopefully as we do this Cisco and HP on software, we can do one-year terms. >> It doesn't seem like these are distractions to you, I mean, Michael Dell always talks about the 90-day shock clock. With you, you sat down with Stu after the IPO, I was struck by your comments of "look, I'm not going to get all wound up about the stock price", you know, you're not going to obsess over it. Now it's easy not to obsess when you're growing at 60, 65% a year, but it doesn't seem like it's been a big distraction for you. >> Yeah, I think it's, just like a growing customer base can be a distraction, can be a strength, you know, because you could say, well, they're asking me not to innovate at all, and have the brute force figure out a way to have velocity and quality, because existing customers want quality, because they don't know what else you can be, like, give me a faster horse, right? And then you know from within the area we innovate that's where velocity matters. Same thing is true for Wall Street as well. Main Street wants both, Wall Street is saying look, as long as you can keep growing and grow wisely, I'm not going to touch you, actually. >> I want to ask you about your customers. We've had some great customers on. Most of the customers I've talked to that are Nutanix are what I'd call, you know, they're in the early part of the adoption, they're people that, they're taking some risks, we heard NASDAQ talk you know, forget about the fear, you've got to go forward. As you grow, how do you stop, you know, the enterprise buyer from trying to shift you, change your model? I loved that you're doing things like, you know, many companies are trying to switch to, you know, consumption models to pay as you grow, but as you try to grow that customer base, how do you pull them ahead or how do they not, you know, hold you back? >> Well I think as long as we have an authentic product, customer service, sales motion relationship they'll like us. And I think obviously there are different kind of sub-functions in the customer itself like procurement versus ID versus the business user and so on, and it's a constant hussle, there's no, again way to say that it's going to be a perfect world one day. If you can keep building great products, have great customer service, and we know that our sales motion is easy because it can, it can be a really good product and have really good customer support, but customers might hate transacting with you. I think that's the last piece that matters, and I think as computing becomes a real consumer market, that's what's happening you know with cloud, you can go and buy a computer like the way you used to buy your toothpaste or mouthwash or shampoo. I think it's becoming even more customer-centric, even more customer service-focused and so on. So I think the changing landscape of computing keeps a lot of vendors honest actually. Now, that doesn't mean that everybody will innovate, enough of them will say look, I'm done, and I think one of the things we've done well in the last five years is that the thesis of the product market fit. Like well, we know this is the product direction, this is the vision of the company, it has actually stuck. You know, people have said "I like what you guys are saying," actually. Over and over and over again, I mean, combos and acquisition, people are like "I love this". HP was one of those really audacious ideas, people said "I love this, now that I see it, I love it, when I didn't see it, I was skeptical". So I think a lot of the thesis of the company around innovation have worked in our favor. I think if we keep having that luck with ourselves, good things will happen. >> So Dheeraj, your positioning of the company has usually been a little bit ahead of the market, you know, for years it was like, ah, what, that HEI thing is a niche, and it's not really much that different, oh, enterprise cloud is nothing more than, you know, kind of vapor you know, what are the misperceptions you see today that you'd want to clarify for the market as to who Nutanix is today and where you're going? >> Well the first one is that we are a hardware company, because we are a hardware company, even though we sell a lot of software within the hardware and obviously we do a lot more software these days. And the fact that HEI's the destination, where HEIs basically was a mere milestone like five years ago or something, you know, we talk about I'd say about five years ago imagine a lot of the competition is talking about SEI today, when people are saying the compute storage form factor is interesting but not that interesting because I need to figure out how to converge clouds now, not just converge devices within my data center, I need to figure out OPEX and CAPEX, how do I meld those things, how do I burst, and things like that, you know. So the story keeps evolving because the consumers, the customers, and the competitors continue to evolve the market as well actually. So I would say that people have to look at us as an OS company, and the more they try us the more they realize why we are an OS company. They look at our networking R&D, they look at our security pieces together, storage, hypervisor, and now Zai, I think, you know, good things will happen. >> I inferred from your keynote yesterday that you're on a mission to change the operating model. Certainly Amazon has changed the operating model as we well know and it's translated into their operating profit, you know, their marginal economics as we've talked about in the past are compelling, software-like for services. As you change that operate- first of all, did I get that right? Are you on that- >> I call it a consumption model. >> Consumption model, great. So where do you see that going for customers? They're obviously taking labor costs out, how far can they take that- how much can you sort of automate in that process for your own company, taking those labor costs out to drive your margin? >> I think again, now going back to this idea of invisible infrastructure, just like it has no finish line, automation has no finish line. We used to automate 50 years ago as well. Automation as a word has existed for 200 years you know, since the industrial revolution actually. So again, there's no finish line in automation, there's no finish line for what machines can do compared to humans and I think they've constantly evolved, I mean, 200 years ago we were primarily agrarian, we would do agriculture and nothing more, and today we are doing a lot more things with our brain and I think we're becoming a more evolved species actually. So I think as machines do more, humans will also figure out a way to continue to do higher level things, so I think the best part about this company is that what we have chosen has no end to it, and the more we think we automate, the more we'll have to automate some more actually. And not just within the realm of compute, virtualization, or storage or networking or security, but also migration, portability, you know, what does it mean to really look at things on and off premise and things like that, so a lot of work is around that. Application automation is a big part of it as well. >> When I hear you say there's no finish line, it reminds me of Jeff Bezos, he says, "there is no day two, we will always be in day one". The two concerns I have, that is, number one, you can't have your employees constantly be charging, you know they run to the point where they're going to burn out and I hear Amazon is a challenging company to work for. Secondly, every customer I talk to, like, boy, they can't keep up with the six week release cycles that are coming at that, you know, remember when it used to be 18 to 24 months, you know, that was nice, we could do upgrade cycles when we want. How do you internally and with customers manage that pace of change and avoid burnout or over-complicating the environment for your customers? >> That's a great point actually, because obviously, if you don't have delighted work, it's hard. For them right now their delight, for Amazon employees, it's stock pricing. That's the only delight they have. But I look at it as a marathon of strengths. You basically have to sprint, take some rest, like after this we'll rest a little, and then say let's go and do another sprint, because NIS is another sprint, you know, and then reading all this stuff is another sprint, so I think if we can keep looking at that, and plus even do a little bit of baton-passing that'll happen, you know, I think as a company, we were all in San Jose and now some of the baton has passed to Seattle, some of the baton has passed to RDP Durham and Bangalore. We build this distributed workforce where different teams are coming in and saying "now I can run with it as well", like Bangalore could not have run with this six, seven, eight years ago, because everything was here. You know, RDP and Seattle were too small for us so I think there's critical mass emerging where the overall morale of the workforce is actually just as good as it was like five, six, seven years ago. Now, people talk about burnout a lot, but I also believe that a lot of this is choice. People who are saying "I know how to blend work and life". It's becoming hybrid, there's no such thing as work separate, life separate, it's melding into each other right now, and it's really becoming like this where people who are working smarter saying "I can figure out what that means in terms of balance". And millenials are again one of those who were born with all these things from day one. So the devices have been with them from day one, actually. They're saying "well, I can't not interact with the machine some time or the other". So I think that a lot of this is evolution for us, I mean, the eight to five way of looking at work, which is "batch processing", is now becoming multitasking and so on, so what happened to operating systems 30, 40 years ago is what's happening to humans as well actually. >> You know, we're out of time, but I wanted to share with our audience, one of the unique things about this conference is that you have advisors. A lot of people hire McKinsey and it all stays, you know, behind closed doors. Condi Rice, Robert Gates, Stephen Hadley, Deepak Malhotra, these are advisors to your company and we've met them all, many have been on theCUBE. You share with your community, your advisors, and you put them in front of your community and it's great content. I've really not seen a company be that transparent with its advisors before. Deliberate? Just sort of happens? >> It's always been like that actually, you know because the more a company learns from them, honestly, the more we've gotten out of them in turns of ROI, if you just think of it from a left wing point of view, but the right wing is that people want to build careers, not just wealth, they want to build careers, they want to actually be with folks that they can look up to you know, when the going gets tough. How do you remember somebody's words? Not just in books, but you know, in flesh and blood, you're like, wow, I talked to Condi Rice, I talked to Bob Gates, I talked to Steve Hadley, these people told me exactly what they went through, and I think there's no substitute to experience actually. To me, people like Mark Templeton and Frank Slootman, they all are great sources of energy and aspiration and ambition as well. >> Outstanding. >> No compression I've heard on experience, right Dave? >> That's right. Dheeraj, I feel calm just hanging out with you here, so thanks very much for coming back on theCUBE, it's always a pleasure to see you, and thanks for having us. Alright, keep it right there everybody, Stu and I will be back with our next guest. We're live from .Next, be right back. (electronic music)