>> From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. (dramatic music) >> Hi, everyone, welcome to this week's Breaking Analysis. It's Friday, October 18th, and this is theCUBE Insights, powered by ETR. Today, ETR had its conference call, its webcast. It was in a quiet period, and it dropped this tome. I have spent the last several hours going through this dataset. It's just unbelievable. It's the fresh data from the October survey, and I'm going to share just some highlights with you. I wish I had a couple hours to go through all this stuff, but I'm going to just pull out some of the key points. Spending is flattening. We've talked about this in previous discussions with you. But, things are still healthy. We're just reverting back to pre 2018 levels and, obviously, keeping a very close eye on the spending data and the sectors. There is some uncertainty heading into Q four. It's not only tariffs, you know. 2020's an election year, so that causes some uncertainty and some concerns for people. But, the big theme from ETR is there's less experimentation going on. The last several years have been ones where we're pushing out digital initiatives, and there was a lot of experimentation, a lot of redundancy. So, I'm going to talk more about that. I'm going to focus on a couple of sectors. I'm going to share with you there's the overall sector analysis. Then, I'm going to focus in on Microsoft and AWS and talk a little bit about the cloud. Then, I'm going to give some other highlights and, particularly, around enterprise software. The other thing I'll say is that the folks from ETR are going to be in the Bay Area on October 28th through the 30th, and I would encourage you to spend some time with them. If you want to meet them, just, you know, contact me @dvellante on Twitter or David.Vellante@siliconangle.com. I have no dog in this fight. I get no money from these guys. We're just partners and friends, but I love their data. And, they've given me access to it, and it's great because I can share it with you, our community. So, let's get right into it. Alex, if you just bring up the first slide, what I want to show is the ETR pulse check survey demographics, so every quarter, ETR does these surveys. They've got a dataset comprising 4500 members, panelists if you will, that they survey each quarter. In this survey, 1336 responded, representing 457 billion in spending power, and you can see from this slide, you know, it's got a nice mix of large companies. Very heavily weighted toward North America, but you're talking about, you know, 12% AMIA out of 1300. Certainly substantial and statistically significant to get some trends overseas. You can see across all industries. And then, job titles, a lot of C level executives, VPs, architects, people who know what the spending climate looks like, so I really like the mix of data. Let me make some overall comments, and, Alex, the next slide sort of gives some snapshot here. The big theme is that there's a compression in tech spending, as they say. It's very tough to compare to compare to 2018, which was just a phenomenal year. I mentioned the tariffs. It was an election year. Election years bring uncertainty. Uncertainty brings conservatism, so that's something, obviously, that's weighing, I think, on buyers' minds. And, I'll give you some anecdotal comments in a moment that will underscore that. There's less redundancy in spending. This has been a theme of ETR's for quite some time now. The last few years have been a try everything type of mode. Digital initiatives were launched, let's say, starting in 2016. ETR called this, I love this, Tom DelVecchio, the CEO of ETR, called it a giant IT bake off where you were looking at, okay, cloud versus on prem or SaaS versus conventional models, new databases versus legacy databases, legacy storage versus sort of modern storage stacks. So, you had this big bake off going on. And, what's happening now is you're seeing less experimentation so less adoption of new technologies, and replacements are on the rise. So, people are making their bets. They're saying, "Okay, these technologies "are the ones we're going to bet on, "these emerging disruptive technologies." So, they're narrowing their scope of emerging technologies, and they're saying, "Okay, now, "we're going to replace the legacy stuff." So, you're seeing these new stacks emerging. I mentioned some others before, but things like cloud native versus legacy waterfall approaches. And, these new stacks are hitting both legacy and disruptive companies for the reasons that I mentioned before because we're replacing legacy, but at the same time, we're narrowing the scope of the new stuff. This is not necessarily good for the disruptors. Downturns, sometimes, are good for legacy because they're perceived as a safer bet. So, what I want to do, right now, is share with you some of the anecdotals from the survey, and I'll just, you know, call out some things. By the way, the first thing I would note is, you know, ETR did sort of an analysis of frequency of terms. Cloud, cost, replacing, change, moving, consolidation, migration, and contract were the big ones that stood out. But, let me just call a couple of the anecdotals. When they do these surveys, they'll ask open ended questions, and so these kind of give you a good idea as to how people are thinking. "We're projecting a hold based on impacts from tariffs. "Situation could change if tariff relief is reached. "We're really concerned about EU." Another one, "Shift to SaaS is accelerating "and driving TCO down. "Investing in 2019, we're implementing "and retiring old technologies in 2020. "There's an active effort to consolidate "the number of security vendor solutions. "We're doing more Microsoft." Let's see, "We have moved "to a completely outsourced infrastructure model, "so no longer purchasing storage," interesting. "In general, we're trying to reduce spending "based on current market conditions." So, people, again, are concerned. Storage, as a category, is way down. "We're moving from Teradata to AWS and a data lake." I'll make some comments, as well, later on about EDW and Snowflake in particular, who, you know, remains very healthy. "We're moving our data to G Suite and AWS. "We're migrating our SaaS offering to elastic. "We're sunsetting Cognos," which, of course, is owned by IBM. "Talend, we decided to drop after evaluating. "Tableau, we've decided to not integrate anymore," even though Tableau is, actually, looking very strong subsequent to the sales force acquisition. So, there's some comments there that people, again, are replacing and they're narrowing some of their focus on spending. All right, Alex, bring up the next slide. I want to share with you the sector momentum. So, we've talked about this methodology of net score. Every time ETR does one of these pulse surveys, they ask, "Are you spending more or are you spending less? "Or, are you spending the same?" And then, essentially, they subtract the spending less from the spending more, and the spending more included new adoptions. The spending less includes replacements. And, that comes out with a net score, and that net score is an indicator of momentum. And, what you can see here is, the momentum I've highlighted in red, is container orchestration, the container platforms, machine learning, AI, automation, big theme. We were just at the UiPath conference, huge theme on automation. And, of course, robotic process automation, RPA. Cloud computing remains very strong. This dotted red line that I put in there, that's at the, you know, 30%, 35% level. You kind of want to be above that line to really show momentum. Anything below that line is either holding serve, holding steady, but well below that line, when you start getting into the low 20s and the teens, is a red zone. That's a danger zone. You could see data warehouse software is kind of on that cusp. and I'm not, you know, a huge fan of the sector in general, but I love Snowflake and what they're doing and the share gains that are going on there. So, when you're below that red line, it's a game of share gain. Storage, same thing we've talked about. The overall storage sector is down. It's being pressured by cloud, as that anectdotal suggested. It's also being pressured by the fact that so much flash has been injected into the data center over the last couple of years. That given headroom for buyers. They don't need as much storage, so overall, the sector is soft. But then, you see companies, like Pure, continuing to gain share, so they're actually quite strong in this quarter survey. So, you could see some various sectors here. IT consulting and outsourced IT not looking strong, data center consolidation. By the way, you saw, in IBM's recent earnings, Jim Kavanaugh pointed to their outsourcing business as a real drag, you know. Some of these other sectors, you could see, actually, PC laptop, this is obviously a big impact for Dell and HP, you know, kind of holding steady. Actually, better than storage, so, you know, for that large of a segment, not necessarily such a bad thing. Okay, now, what I want to do, I want to shift focus and make some comments on Microsoft, specifically, and AWS. So, here's just some high level points on this slide on Microsoft. The N out of that total was 1200, so very large proportion of the survey is weighted toward Microsoft. So, a good observation space for Microsoft. Extremely positive spending outlook for this company. There's a lot of ways to get to Microsoft. You want cloud, there's Azure, you know. Visualization, you got Power BI. Collaboration, there's Teams. Of course, email and calendaring is Office 365. You need hiring data? Well, we just bought LinkedIn. CRM, ERP, there's Microsoft Dynamics. So, Microsoft is a lot of roads, to spend with Microsoft. Windows is not the future of Microsoft. Satya Nadella and company have done a great job of sort of getting out of that dogma and really expanding their TAM. You're seeing acceleration from Microsoft across all key sectors, cloud, apps, containers, MI, or machine intelligence, AI and ML, analytics, infrastructure software, data warehousing, servers, GitHub is strong, collaboration, as I mentioned. So, really, across the board, this portfolio of offerings powered by the scale of Azure is very strong. Microsoft has great velocity in the cloud, and it's a key bellwether. Now, the next slide, what it does is compares the cloud computing big three in the US, Azure, AWS, and GCP, Google Cloud Platform. This is, again, net score. This is infrastructure as a service, and so you can see here the yellow is Microsoft, that darker line is AWS, and GCP is that blue line down below. All three are actually showing great strength in the spending data. Azure has more momentum than AWS, so it's growing faster. We've seen this for a while, but I want to make a point here that didn't come up on the ETR call. But, AWS is probably two and a half to three times larger in infrastructure as a service than is Microsoft Azure, so remember, AWS has a $35 billion at least run rate business in infrastructure as a service. And, as I say, it's two and a half to three times, at least, larger than Microsoft, which is probably a run rate of, let's call it, 10 to 12 billion, okay. So, it's quite amazing that AWS is holding at that 66 to now dropping to 63% net score given that it's so large. And, of course, way behind is GCP, much smaller share. In fact, I think, probably, Alibaba has surpassed GCP in terms of overall market share. So, at any rate, you could see all three, strong momentum. The cloud continues its march. I'll make some comments on that a little bit later. But, Azure has really strong momentum. Let's talk, next slide if you will, Alex, about AWS. Smaller sample size, 731 out of the total, which is not surprising, right. Microsoft's been around a lot longer and plays in a lot more sectors. ETR has a positive to neutral outlook on AWS. Now, you have to be careful here because, remember, what ETR is doing is they're looking at the spending momentum and comparing that to consensus estimates, okay. So, ETR's business is helping, largely, Wall Street, you know, buy side analysts make bets, and so it's not only about how much money they make or what kind of momentum they have in aggregate. It's about how they're doing relative to expectation, something that I explained on the last Breaking Analysis. Spending on AWS continues to be very robust. They've got that flywheel effect. Make no mistake that this positive to neutral outlook is relative to expectations. Relative to overall market, AWS is, you know, kicking butt. Cloud, analytics, big data, data warehousing, containers, machine intelligence, even virtualization. AWS is growing and gaining share. My view, AWS will continue to outperform the marketplace for quite some time now, and it's gaining share from legacy players. Who's it hurting? You're seeing the companies within AWS's sort of sphere that are getting impacted by AWS. Oracle, IBM, SAP, you know, cloud Arrow, which we mentioned last time is at all time lows, Teradata. These accounts, inside of AWS respondents, are losing share. Now, who's gaining share? Snowflake is on a tear. Mongo is very strong. Microsoft, interestingly, remains strong in AWS. In fact, AWS runs a lot of Microsoft workloads. That's, you know, fairly well known. But, again, Snowflake, very strong inside of AWS accounts. There's no indication that, despite AWS's emphasis on database and, of course, data warehouse, that Snowflake's being impacted by that. The reverse, Snowflake is taking advantage of cloud momentum. The only real negative you can say about AWS is that Microsoft is accelerating faster than AWS, so that might upset Andy Jassy. But, he'll point out, I guess, what I pointed out before, that they're much larger. Take a look at AWS on this next slide. The net score across all AWS sectors, the ones I mentioned. And, this is the growth in Fortune 500, so you can see, very steady in the large accounts. That's that blue line, you know, dipped in the October 18 survey, but look at how strong it is, holding 67% in Fortune 500 accounts. And then, you can see, the yellow line is the market share. AWS continues to gain share in those large accounts when you weight that out in terms of spending. That's why I say AWS is going to continue to do very well in this overall market. So, just some, you know, comments on cloud. As I said, it continues to march, it continues to really be the watchword, the fundamental operating model. Microsoft, very strong, expanding its TAM everywhere, I mean, affecting, potentially, Slack, Box, Dropbox, New Relic, Splunk, IBM, and Security, Elastic. So, Microsoft, very strong here. AWS continues to grow, not as strong as '18, but much stronger than its peers, very well positioned in database and artificial intelligence. And so, not a lot of softness in AWS. I mentioned on one of the previous Breaking Analysis, Kubernetes', actually, container's a little soft, so we always keep an eye on that one. And, Google, again, struggling to make gains in cloud. One of the comments I made before is that the long term surveys for Google looked positive, but that's not showing up yet in the near term market shares. All right, Alex, if you want to bring up the next slide, I want to make some quick comments before I close, on enterprise software. There was a big workday scare this week. They kind of guided that their core HR business was not going to be as robust as it had been previously, so this pulled back all the SaaS vendors. And, you know, the stock got crushed, Salesforce got hit, ServiceNow got hit, Splunk got hit. But, I tell you, you look at the data in this massive dataset, ServiceNow remains strong, Salesforce looks, very slight deceleration, but very sound, especially in the Fortune 100 in that GPP, the giant public and private companies that I talked about on an earlier call. That's one of the best indicators of strength. Tableau, actually, very strong, especially in large accounts, so Salesforce seems to be doing a good job of integrating there. Splunk, (mumbles) coming up shortly, I think this month. Securities, the category is very strong, lifting all ships. Splunk looks really good. Despite some of the possible competition from Microsoft, there's no indication that Splunk is slowing. There's some anecdotal issues about pricing that I talked about before, but I think Splunk is really dealing with those. UiPath's another company. We were just out there this past week at the UiPath Forward conference. UiPath, in this dataset, when you take out some of the smaller respondents, smaller number of respondents, UiPath has one of the highest net scores in the entire sample. UiPath is on a tear. I talked to dozens of customers this week. Very strong momentum, and then moving into, got new areas, and I'll be focusing on the RPA sector a little later on. But, automation, in general, really has some tailwinds in the marketplace. And, you know, the other comment I'll make about RPA is a downturn actually could help RPA vendors, who, by the way, all the RPA vendors look strong. Automation Anywhere, UiPath, I mentioned, Blue Prism, you know, even some of the legacy companies like Pega look, actually, very strong. A downturn in the economy could help some of the RPA vendors because would be looking to do more with less, and automation, you know, could be something that they're looking toward. Snowflake I mentioned, again, they continue their tear. A very strong share in expansion. Slightly lower than previous quarters in terms of the spending momentum, but the previous quarters were off the charts. So, also very strong in large companies. All right, so let me wrap. So, buyers are planning for a slowdown. I mean, there's no doubt about that. It's something that we have to pay very close attention to, and I think the marker expects that. And, I think, you know, it's okay. There's less spaghetti against the wall, we're going to try everything, and that's having a moderating effect on spending, as is the less redundancy. People were running systems in parallel. As they say, they're placing bets, now, on both disruptive tech and on legacy tech, so they're replacing both in some cases. Or, they're not investing in some of the disruptive stuff because they're narrowing their investments in disruptive technologies, and they're also replacing some legacy. We're clearly seeing new adoptions down, according to ETR, and replacements up, and that's going to affect both legacy and disruptive vendors. So, caution is the watchword, but, overall, the market remains healthy. Okay, so thanks for watching. This is Dave Vellante for CUBE Insights, powered by ETR. Thanks for watching this Breaking Analysis. We'll see you next time. (dramatic music)