>> From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now here's your host, Dave Vellante. >> Hello everybody and welcome to this week's CUBE Insights, powered by ETR. It is Breaking Analysis, but first I'm coming to you from the floor of Cisco Live in Barcelona, and I want to talk about storage. Storage continues to be soft but there are some bright spots. I've been reporting on this for awhile now and I want to dig in and share with you some of the reasons why, maybe give you some forecasts as to what I think is going to happen in the coming months. And of course, we want to look into some of the ETR spending data, and try to parse through that and understand who's winning, who's losing, who's got the momentum, where are the tailwinds and headwinds. So the first thing I want to show you is let's get right into it. What this slide is showing here is a storage spending snapshot of net score. Now remember, net score in the ETR parlance is an indicator of momentum or spending velocity. Essentially every quarter, what ETR does is they go out to, in this case, 1100 respondents out of the 4500 dataset, and they ask them are you spending more or are you spending less. Essentially they subtract the less from the more and that constitutes net score. It's not that simple but for this purpose, that's what we're showing. Now you can see here on the left hand side, I'm showing all respondents out of 1161. You see the January survey net scores. You've got Rubrik, Cohesity, Nutanix, and Pure, and VMware vSAN are the top five. So Rubrik and Cohesity, very strong, and interesting, Rubrik was very strong last quarter. Cohesity not as strong but really shooting up. It kind of surprised me last quarter, Cohesity being a little low but they were early into the dataset and now they're starting to show what I think is really happening in the marketplace. That's a good indicator. But you can see 75 percent, 72 percent. Nutanix still very strong at 56 percent, driving that hyperconverge piece. You see Pure Storage at 44 percent, down a little bit, talk a little bit more about that in a moment. VMware vSAN, Veeam, et cetera, down the list. The thing about the left hand side and storage in general, you can see the softness. Only about one third of the suppliers are in the green, and that's a problem. If you compare this to security, probably three quarters are in the green. It's a much hotter segment. Now, look on the right hand side. The right hand side is showing what ETR calls GPP, giant, public, and private. You can see there's an N of 403. These are the largest, the very largest public and private companies, private company being a company like Mars Candy. And they say that they are the best indicators of spending momentum in the dataset. So really isolating on some of the large companies. Look what happens here. You can see Rubrik gets even stronger as does Cohesity, they're into the 80 percent range. That's really rarefied air, so very strong. You can see Nutanix drops down. It does better in the smaller companies, it appears. They drop down to 41 percent. Pure gets stronger in the GPP at 68 percent. You can see VMware's vSAN uptick to 45 percent. Nimble gets better, HPE's Nimble, to 54 percent. Dell drops down to 4.8 percent. HPE goes up to 33 percent. HPE was red in the left hand side. You can see Veeam drops, not surprising, Veeam in the biggest companies is not going to be as prevalent. We talked about that in our Breaking Analysis segment after the acquisition of Veeam. You can see NetApp bumps up a little bit but it's still kind of in that red zone. I also want to call your attention to Actifio. They're way down on the bottom in the left hand side, which kind of surprised me. And then I started digging into it because I know Actifio does better in the larger companies. In the right hand side, they pop up to 33 percent. It's only an N of three, but what I'm seeing in the marketplace is Actifio solving some really hard problems in database and copy data management. You're starting to see those results as well. But generally speaking, this picture is not great for storage, with the exception of a few players like Rubrik and Cohesity, Pure, Nutanix. And I'm going to get into that a little bit and try to explain what's going on here. The market's bifurcated. Primary storage has been on the back burner for awhile now, and I've been talking about that. The one exception to that is really been Pure. Little bit for Dell EMC coming back, we'll dig into that a little bit more but Pure has been the stand-out. They're even moderating lately, I'll talk about that some more. Secondary storage is where the market momentum is and you can see that with Rubrik and Cohesity. Again, we'll talk about that some more. Let me dig into the primary side. Cloud, as I've talked about in many Breaking Analysis segments is siphoning off demand from on-prem spend. The second big factor in storage has been there was such an injection of flash into the marketplace, it added headroom. Customers used to buy spindles to get performance, and they don't need to do that so much anymore because so much flash was pushed into the system. The third thing is you're still seeing in primary the consolidation dynamics play out with hyperconverge. So hyperconverge is the software defined bringing together of storage, compute, and networking into a single logical managed unit. That is taking share away from traditional primary storage. You're also seeing tactical NAND pricing be problematic for storage suppliers. You saw that with Pure again this past quarter. NAND pricing comes down, which you'd think would be a good thing from a component standpoint, which it is, but it also lowers prices of the systems. So that hurt Pure's revenue. Their unit volume was pretty good but you're seeing that sort of put pressure on prices, so ASPs are down, average system prices. Let's turn our attention to the secondary market for a moment. Huge injection of venture capital, like a billion dollars, half a billion dollars over the last year, and then another five billion just spent on the acquisition of Veeam. A lot of action going on there. You're seeing big TAM expansions where companies like Rubrik and Cohesity, who have garnered much of that VC spending, are really expanding the notion of data protection from back-up into data management, into analytics, into security, and things of that nature, so a much bigger emphasis on TAM expansion, of course as I talked about the M and A. Let's dig into each of these segments. The chart that I'm showing now really digs into primary storage. You can see here the big players, Pure, Dell EMC, HPE, NetApp, and IBM. And lookit, there's only company in the green, Pure. You can see they're trending down just a little bit from previous quarters but still far and away the company with most spending momentum. Again, here I'm showing net score measure of spending velocity back to the January '18 survey. You can see Dell EMC sort of fell and then is slowly coming back up. NetApp hanging in there, Dell EMC, HP, and NetApp kind of converging, and you can see IBM. IBM announced last quarter about three percent growth. I talked about that actually in September. I predicted that IBM storage would have growth because they synchronized their DS8000 high-end mainframe announcement to the z15, so you saw a little bit of uptick in IBM. Pure, as I said, 15 percent growth. I mean, if you're flat in this market or growing at three percent, you're doing pretty well, you're probably a share gainer. We'll see what happens in February when Dell EMC, HPE, and NetApp announce earnings. We'll update you at that time. So that's what you're seeing now. Same story, Pure outpacing the others, everybody else fighting for share. Let's turn our attention now to secondary storage. What I'm showing here is net score for the secondary storage players. I can't isolate on a drill down for secondary storage, last slide I could do on storage overall, but what I can show is pure plays. What's showing here is Rubrik, Cohesity, Veeam, Commvault, and Veritas. Five pure play, you can argue Veritas isn't a pure play, but I consider it a pure play data protection vendor. Look at Rubrik and Cohesity really shooting up to the right, 75 percent and 72 percent net scores, respectively. You see Veeam hanging in there. This is again, all respondents, the full 1100 dataset. Commvault announced last quarter it beat earnings but it's not growing. You can see some pressure there, and you can see Veritas under some pressure as well. You can see a net score really deep in the red, so that's cause for some concern. We'll keep watching that, maybe dig into some of the larger accounts to see how they're doing there. But you can see clear standouts with Rubrik and Cohesity. I want to look at hyperconverge now. Again, I can't drill into hyperconverge but what I can do is show some of the pure plays. So what this slide shows is the net score for some of the pure play hyperconverge vendors led by Nutanix. The relative newcomer here is vSAN with VMware. You can see Dell EMC, VxRail, and Simplivity. I would say this. A lot of the marketing push that you hear out of Dell and out of VMware says Nutanix is in big trouble, they're dying and so forth. Our data definitely shows something different. The one caution is, you can see Nutanix and larger accounts, not as strong. And you can see both vSAN and Dell EMC stronger in those larger accounts. Maybe that's kind of their bias and their observation space, but it's something that we've got to watch. But you can see the net scores here. Everybody's in the green because overall, this is a strong market. Everybody is winning. It's taking share as I said from primary. We're watching that very closely. Nutanix continues to be strong. Watching very carefully that competitive dynamic and the dynamics within those larger companies which are a bellwether. Now the big question that I want to ask here is can storage reverse the ten-year trend of the big cloud sucking sound that we have heard for the past decade. I've been reporting with data on how cloud generally has hurt that storage spend on-prem. So what I'm showing here in this slide is the net score for the cloud spenders. Many hundreds of cloud spenders in the dataset. What we're showing here is the net score, the spending velocity over the last 10 years for the leaders. You can see Dell EMC, the number one. NetApp, right there in terms of market share, IBM as well. I didn't show HPE because the slide got too busy but they'd be up there as well. So these are the big spenders, big on-prem players and you can see, well, it's up and down. The highs are lower and the lows tend to be lower. You can see on the latest surveys, maybe there's some upticks here in some of the companies. But generally speaking, the trend has been down. That siphoning away of demand from the cloud guys. Can that be reversed, and that's something that we're going to watch, so keeping an eye on that. Let me kind of summarize and I'll make some other comments here. One of the things we're going to watch here is Dell EMC, NetApp, and HPE earnings announcements in February. That's going to be a clear indicator. We'll look for what's happening with overall demand, what the growth trajectory looks like, and very importantly, what NAND pricing looks like. As a corollary to that, we're going to be watching elasticity. I firmly believe as prices go down, that more storage is going to bought. That's always been the case. Flash is still only about 20, 25, 30 percent of the market, about 30 percent of the spending, about 20 percent of the terabytes. But as prices come down, expect people to buy more. That's always been the case. If there's an elasticity of demand, it hasn't shown up in the earning statements, and that's a bit of a concern. But we'll keep an eye on that. We're also going to watch the cloud siphoning demand from on-prem spend. Can the big players and guys like Pure and others, new start-ups maybe, reverse that trend. Multi-cloud, there's an opportunity for these guys. Multi-cloud management, TAM expansion into new areas. Actually delivering services in the cloud. You saw Pure announce block storage in the cloud. So that's kind of interesting that we'll watch. Other players may be getting into the data protection space, but as it relates to the cloud, one of the things I'm watching very closely is the TAM expansion of the cloud players. What do I mean by that. Late last year, Amazon announced a broader set of products or services really in its portfolio. Let's watch for Amazon's moves and other big cloud players into the storage space. I fully expect they're going to want to get a bigger piece of that pie. Remember, much if not most of Amazon's revenue comes from compute. They really haven't awakened to the great storage opportunity that's out there. Why is that important. You saw this play out on-prem. Servers became a really tough market. Intel made all the money. Amazon is a huge customer of Intel, and Intel's getting a big piece of Amazon's EC2 business. That's why you see, in part, Amazon getting into its own chip design. I mean, in the server business, you're talking about low gross margin business. If you're in the 20s or low 30s, you're thrilled. Pure last quarter had 70 plus percent gross margins. It's been a 60 plus percent gross margin business consistently. You're going to see the cloud guys wake up to that and try to grab even more share. It's going to be interesting to see how the traditional on-prem vendors respond to that. Coming into last decade, you saw tons of start-ups but only two companies really reached escape velocity: Nutanix and Pure. At the beginning of the century, you saw Data Domain, Isilon, Compellent, 3PAR all went public. EqualLogic and LeftHand got taken out. There are a bunch of other companies that got acquired. Storage was really a great market. Coming into this decade, mid part of the decade, you had lots of VC opportunity here. You had Fusion and Violin, Intentury went public. They all flamed out. You had a big acquisition with SolidFire, almost a billion dollars, but really Pure and Nutanix were the only ones to make it, so the question is, are you going to see anyone reach escape velocity in the next decade, and where's that going to come from. The likely players today would be Cohesity and Rubrik. Those unicorns would be the opportunity. You could argue Veeam, I guess reached it, but hard to tell because Veeam's a private company. By escape velocity, we're talking large companies who go public, have a big exit in the public market and become transparent so we really know what's going on there. Will it come from a cloud or a cloud native play. We'll see. Are there others that might emerge, like a Nebulon or a Clumio. A company like Infinidat's doing well, will they hit escape velocity and do an IPO and again, become more transparent. That's again something that we're watching, but you're clearly seeing moves up the stack where there's a lot more emphasis in spending on cloud, cloud native. We clearly saw it with hyperconverge consolidation but up the stack towards the apps, really driving digital transformations. People want to spend less on heavy lifting like storage. They're always going to need storage. But is it going to be the same type of market it has been for the last 30 or 40 years, of great investment opportunities. We're starting to see that wane but we'll keep track of it. Thank you for watching this Breaking Analysis, this is CUBE Insights powered by ETR. This is Dave Vellante. We'll see you next time.

>> Commentator: Live from New Orleans. It's theCUBE. Covering VeeamON 2017. Brought to you by Veeam >> We're back, this is theCUBE. The leader in live tech coverage. We're here at VeeamON 2017 day two. Bill Philbin is here, Senior Vice President at Hewlett Packard Enterprise. And runs the storage business for HPE. Great to see you again my friend. >> Hey Dave, it's always good to see you. >> Really? >> Always look so fantastic. >> Thank you, where's the tie? >> There's no tie. >> I will say, you guys, those of you who didn't see it, Bill nailed the Keynote this morning. It was great, it was funny, self deprecating, and genuine. And essentially you resonated with me, 'cause I got four kids and you were talking about how you call your kids, you either get voicemail, or their voicemails full. >> Bill: That's right. >> You text them, at least your kids text you back. I got to Snapchat my kids to get a hold of them. So you got to get into Snapchat >> They have told me that texting and Facebook is so, you know, 20th century Dad. >> You email 'em, right? >> Yeah. >> You get some important email, you send it to 'em. Like, email? What are you kiddin' me? >> No you know it's not in >> Our lives are challenged, but nonetheless, you got some of your challenges of your own. You're running a big business now at HPE. You guys are making some serious moves in the marketplace. Give us the update on the HPE storage business. >> Yeah, so thanks Dave. >> Every squirrel finds a nut in the forest eventually, so I just had a pretty good day today. But, that was because we have a great story, frankly, to tell. And I think you know, as I was saying before, the storage business is changing. Rather dramatically. Now is it, is it self inflicted? Or is it you know, just a a course correction. I actually believe it's self inflicted in a sense that we've taken many of the capabilities that were previously on high end systems. And we brought 'em to the mid range. We've thinned it, we've de-uped it, we've compressed it, We've got it on SSDs. And so the whole business model, now is different than it was five years ago. Before you sold somebody an appliance, you chocked it full of spinning media. They ran out of IOPS, you sold another appliance, you chocked it full. It was a pretty good business model. That's how I kept Mrs. Philbin in the lifestyle she's grown accustomed, right? Well, now, you don't chock it full of spinning media, you chock it full of SSDs. IOPS are always on guarantee. And then you take all that compaction technology, and that has actually forced a fundamental change, I think, in the storage landscape. That we, including Hewlett Packard have inflicted upon ourselves. I think we take a look at that, and need to take a look at the storage landscape, the number of vendors that are out there. You know, I think that is changing as well, which is, you know, part of the reason why we decided to get into acquiring companies like SimpliVity and Nimble. >> Dave: And you've got a knife fight going on in All-Flash. I got to say, you know, what HPE did with 3PAR surprised me and probably a lot of people. >> Bill: Mhm. >> Most people didn't think you could quote, unquote "bolt on" flash into that architecture. Obviously it wasn't a bolt on, you guys have been very successful. When you talk to your competitors, certainly when you talk to customers they love it. When you talk to competitors they say "yeah, we can compete with company A, B, and C. It's 3PAR that we have trouble with. Because it's simple and it works. >> And some times enduring technologies actually extend beyond, you know, single generations, right? And so, we certainly have heard the story about the new versus the old, and being old maybe this is my perspective. But, you know, enduring technologies actually can transition across architectural and technology boundaries. And that's exactly what we've done, exactly what we've done with 3PAR. >> Now, having said that, you guys have been, I mean you saw 3PAR initially with you know, spinning, and hybrid. Took off, you know, justified the acquisition, made the transition to All-Flash >> Bill: Yeah. >> I've called it many times, 3PAR's the gift that keeps on giving. So how many times can you go to that well, right? So you guys have made some moves here. Not the least of which was Nimble, want to talk about that. And SimpliVity, so. Even though SimpliVity's not under your organization, you have an affinity there. Talk about those two moves and where they fit in the portfolio. >> So let's just start with the 3PAR, just the 3PAR comment just for a quick second. The pure plays versus sort of the, what they call the stayed play. So, it's hard to imagine that 3PAR as a stayed play technology, right? I don't agree with that statement. But that, the reason I don't agree with it is, we're actually going faster than the pure plays in the All-Flash market. We have more revenue than they do, so. I think it's comfortable for people to sort of set one technology off over another but the fact of the matter is, that we're growing faster. The other thing about the market is it generally gravitates toward technologies that are unique in purpose regardless of what they cost. Because the customer demands it. And All-Flash started with guys like Fusion-io and Violin Memory, and all of those guys, right? Eventually what happens though, is customers tire of those additional assets in their data center, right? One more thing they don't want in their data centers, is one more thing in their data center. And that's when the big guys eventually sort of overtake that position. So, I think what you're going to, you're starting to see in the storage landscape is compression at a company level, right? You're seeing the Neutonics and Pures out there. You're seeing then the next tier of companies trying to sort of, you know, make the big break. And the last time a company made a big break in the storage business, that's still independent today. It's a billion dollars of revenue or more, was? >> Dave: NetApp. >> NetApp. Because storage looks like it's easy goin' in but it's not easy when you think about bare metal and databases and transactional systems, and highly available. It's not that easy, and so, that's why a company like a Nimble, who has great technology, Infosite, the CASL file system, great people. To order scale that business, profitably, and have to go to market reach, it needs to align themselves with a company like Hewlett Packard. So, we're really, really excited about Nimble joining the family for sure. That now enables us to sort of take the flash portfolio further across the across the landscape. On SimpliVity, I think the way that you should think about our strategy at Hewlett Packard is it's all about choice. So, you're a customer who wants to sort of, you know, put assets in your data center, and have assets in Microsoft as your cloud we should enable that. If you think Software Defined's the right way to go, we should enable that. You have an appliance customer, we should enable that. If you want to co-locate applications in a simple easy to use interface with storage, we have that, that's SimpliVity. But that choice shouldn't come with operational complexity. So, one of the things that we have to do, and I was talking about this at the Keynote, is we have to somewhat hide ourselves behind the application and make it easier for customers to consume. Because that is what the web offers them. We ought to be able to federate the data, so that you can actually move your data around when your requirements change, or you've got to burst. And the administration ought to be really, really simple. So, our strategy around technologies like SimpliVity, or Nimble, or 3PAR, or you know, MSA, XP, is all around giving customers choice without the operational complexity of having lots of things to manage. >> Bill, I guess I'm trying to, for our audience, try to maybe compare and contrast a little bit >> Yeah. >> Against you know, what was formerly EMC, now Dell EMC, >> Uh-huh. >> Which the knock on them for many years has been, they've got so many products, they overlap. We've covered for many years how, you know, if I have 3PAR and some of the other HP, HPE storage products, I can move between them, is that the difference issues thing So even though if you have Nimble, plus SimpliVity, plus you know, 3PAR. >> So, three is less than seven. Let's just start with that answer. And maybe it's not seven anymore, you know, I've lost track. Second, I think if you're really talking about provisioning storage and networking compute from an application layer, really what you've doing is you want to have a conversation about the service level underneath that the storage provides. Maybe for certain applications you're okay with thinly provisioned or not thinly provisioned et cetera. So, one answer is, a lot of those capabilities are actually hidden by the application layer. However, we know that the thing that doesn't move all that well is data. And data has gravity. So, being able to move data in addition to moving your compute, is one of the reasons that they differentiation for us over the other guys. >> Dave: But, you know, let me just stay on that for a second Stu. We're all storage guys or quasi-storage guys. >> Bill: He's only a quasi-storage guy? >> He's really a networking guy. >> I worked at a storage company for ten years but, yeah. >> You're a newbie then. >> But if you look at history, it is shown that you actually have to have multiple architectures to increase the size of your TM, and penetrate the marketplace. I mean, NetApp is the exception that proves the rule. I mean, they could only go so far with WAFL. I mean you were there, and you know, And so even now NetApp makes a move for solid fire. Obviously EMC has been very successful with, I think it's 17, so not 7. But it actually works, and so, that dogma of oh we have to have one architecture is never proven to really be a winning strategy. >> And frankly, it is really hard to actually stress an architecture from top to bottom, right? So I don't disagree with the comment you made, but that is effectively, however the same problem with the storage startups today is if they do a single thing, only support virtualized environments, whatever it is, right. Only support VDI. The breath is what customers are looking for. And if you don't have the breath, or you're forced to go get the breath, by adding bolt-ons to try and get the breath. It's just going to make it very, very difficult for them to survive in the new world order. Both acquisitions SimpliVity and Nimble were great for the company. >> Bill, can you tie together for us HPE and Veeam, how those fit together. One of the big themes we've been covering is the extension of Veeam started very, very much virtualized now they're physical they're talking about all the cloud solutions. Expect there's a lot of fit between your strategies. >> There is, for years we've have a very, very strong technical partnership between the Veeam engineering team and the StoreOnce engineering team. I think, you know, that is like the basis of trust, I think is the best way to think about it. We've both sort of got competing road maps on occasion, but at the end of the day it's all about, sort of, what's best for the customer. Number one is technical people, second is we have the same view of the market. And I talked about this, this morning, which is, this highly available, always on sort of environment is the same story that we tell. So the messages are aligned. The third is that it's complimentary, we have our own sort of data protection technology with data protector. We have our own sort of snapshot management capability with RMC. The question is, how do we sort of you know, protect the entire environment. And Veeam is a critical asset in that. It's a great business partnership, great technology partnership. The fact that our folks kind of resell Veeam, has just launched the business forward . >> Well, the move to sell the software business to Micro Focus has just opened up new partnership opportunities for you guys. >> Bill: In regards to that we still have a very, very strong partnership with the software guys. You know there's, the largest connect that we have on a backup product today, is get a protector. So I don't expect that to change. But there are people who prefer, you know, to use Veeam and we have to support that. >> Dave: Yeah, but still I mean, if you got the your colleagues in data protector and you're out aggressively partnering with Veeam and it's part of HPE. Maybe you get an email or, you get a "hey, come on Bill, you know, give me a break here." And now I feel like you know, the gloves are off you can do independent of all that internal stuff, plumbing. It's what's right for the customer. Maybe I'm overstating that. >> Perhaps a bit, because we'll still have equity ownership in the new company. Again with all the sort of connect I have, I think that regardless of where the paychecks come from if you will, we have to have a really strong partnership with them. And it's no different than, you know, we also have a partnership with Symantec, I mean we have other partnerships that customers just have made a preference around. That we're not going to convince them, you know, to do something different. Therefore, we've got to have a strong partnership. >> Dave: Alright, so we're going to be at Discover, theCUBE will be there for, been there many years now. I think this is our seventh Discover. >> You've been there as many years as I have, >> So what are we looking forward to there. >> So I think there's a bunch of announcements, we've highlighted one of them today around the secondary flash array for Nimble. There's some new 3PAR announcements that are certainly coming. The Synergy guys are going to certainly have a thing or two to say, I'm thinking. Based on the strength of that platform, that platform's really starting to take off. And so I think you're going to see that, I think this will probably be really the first Discover where, you know, you'll start to see, and maybe Madrid Discover will be different. But you'll start to see the new Hewlett Packard Enterprise. We keep focusing on things that we've spin-merged out, but the thing I think we need to focus on is the fact that we're, this is like a Phoenix of a new company, right? Solely focused on enterprise infrastructure and the customer needs. We've rebranded the TS business and PointNext, which is all around transformation and technology services, so. It's almost like we're starting the clock over again. For the HP employees, we're not changing your service levels. But, for almost everything else, we're rebuilding a brand new company. And that is what Meg and the board are doing, it's really exciting. >> Well, it's true the last couple of Discovers there was a distraction with the split, there was a distraction with two spin-merges. But you've now seen the M&A activity focus on areas like storage, areas like converge, type or converge. >> I always tell this story 'cause you guys like my analogies which is, you know, when you've got lots of kids in your family, my family, my oldest I've got lots of pictures of. The middle kid, you know, some pictures of. The third one virtually no pictures of, right? 'Cause you go from man to man defense, to zone defense. Same is true with a CEO. When you've got seven or eight different things to manage, you're focused, it needs to be spread over seven different or eight things. Now, Meg is actually, got fewer children to manage if you roll the analogy out a little bit. We got a lot of her attention, and a lot of focus. And that I think is really, really important. >> Dave: And now all the pictures are digital, they're in the cloud, they're protected. >> Bill: Yeah. >> Bill, great to see you. >> Good to see you guys. >> Thanks very much for coming on theCUBE, we'll see you in Vegas. >> Bill: You bet. >> Alright, keep it right there everybody, we'll be back with our next guest right after this short break.