 From theCUBE Studios in Palo Alto in Boston, connecting with thought leaders all around the world, this is a CUBE Conversation. Hi, I'm Stu Miniman and welcome to this special CUBE Conversation, where we're helping cover the second generation of the VMware cloud on Dell EMC. Happy to welcome to the program, Rick Villers, who's the vice president of data center and cloud with IDC. Not too far from me, physically, even though of course today's day and age, we're all practicing social distance. So Rick, great to see you, thanks so much for joining. Well, thanks Stu, pleasure to be here. Looking forward to a great conversation. All right, so Rick, you know, usually this time of year, you and I see each other more than we see our families because we are traveling in a co-circuit, going to the analyst events and like. And one of the topics we spent a lot of time talking about over the years is of course cloud. You know, VMware's partnership with Amazon is of course one that the entire industry noticed of and the relationship of Amazon, VMware and Dell is an interesting one. And what we're talking about today though, is the VMware cloud or in the short hand, VMC on Dell EMC. And it's the second generation of this product. Help us understand kind of where this fits in the categorization and the research that you and IDC look at. Yeah, Stu, it's an interesting question. It's one that we've actually been thinking about for several years now. And it had to do with some early conversations we were having back then with companies about their private cloud environment. They'd been deploying those for the last four or five years. We were seeing them come up on a sort of refresh cycle. And we started asking about how satisfied they'd been with those and where they wanted to use them. And we got back some very consistent feedback saying that they'd had some problems with their first generation of their private cloud environment and that they needed to address those. And one of them was a consistency problem is that every private cloud they built, whether they built it themselves or whether they looked at a hosted private cloud provider, even in their own company were different technologies, different configurations, different sets of tools. And that was a big problem for them. The second big problem they'd run into was basically every time there's a new technology or an upgrade or a fix, we basically can't adopt it quickly. We can't use it till the next refresh cycle. So we're always behind, we're playing catch up. And neither one of those things really aligned with what they felt cloud should be and what they'd been seeing in their public cloud environment. And so when we looked at that and we started looking at the feedback about what was coming on, we realized that we were about to see a new generation of private cloud environment. But we said, but this will be different not just because of new technology, but it'll be actually different use cases and a different approach. And the first thing is we said, first of all, these are, it's not so much a private cloud as if they dedicated cloud. It's, I have resources that are dedicated to a business or a service application. I want to get done. And I want to basically operate that just like all those other clouds. And then the second thing is they said, and by the way, this is less and less about a general purpose new data center and just run my data center the same way. It's, I want this to be a platform for creating new services that I want to deliver in a location, a factory, a hospital, you know, a city block, whatever that is. And so we brought those together and we started looking at those and we said, well, this is really going to lead to the emergence of a whole new product class, which we started calling local cloud as a server because it reflected both of those things. It's like, it was no longer assembling piece parts, but it was consuming these resources and as a service method with all of the benefits of agility and responsiveness and continual enhancement that come with that. But it was also about, I need to be able to put these in new location, not just in my corporate data center, but out where I'm trying to do new businesses and services. And that's what led us to start talking about this new product category called local cloud as a service. And then we started seeing solutions that came out on the market that fit very much with this idea. Okay, yeah, Rick, really interesting because you're right, you know, private cloud is a conversation we've been having in the industry for about a dozen years. And one of the biggest challenges is you talk to 100 customers and you get 150 definitions of what a private cloud is. So if I hear you right, local cloud is, in some ways, it's an extension of what we see in the public cloud. So, you know, I think back, it used to be, hey, can I get this same stack in both places? We saw companies like IBM and Oracle and even VMware thing, you know, how can I match what you have in your data center there as opposed to, you know, Azure Stack, AWS Outposts. We're saying, hey, we're actually going to give you the same, you know, same hardware, you know, same software and it's as a service as you said. You talked about also some of those new locations. So, you know, without getting into too much depth, so it sounds like, you know, I've looked a little bit at your research there. There is the data center piece and then really emerging, there's the potential for edge use cases. Do I see that right as just like, you know, we've got kind of the hyperscalers, we have the data center, edge is pulling on everything. So, you're saying edge doesn't kill the cloud and everything before it. It's going to just be another option. Oh, absolutely. I mean, for us, this is more of an extension of the cloud environment. And by that, we also said, one of the other critical things in this is, it changes, if you think about new applications that you're trying to create, whether it's in the public cloud or whether it's one of these local cloud environments, they're being built on a cloud native architecture. And that's one of the other key elements of this solution is these become the platforms that allow enterprises to bring things like containers and serverless designs and this sort of, you know, DevOps-driven application development model into both the corporate data centers, which absolutely these solutions play, but also again, to extend it out to places where in the past you didn't have a lot of IT, you didn't have a lot of compute and storage. But now, if you're trying to do things like real-time monitoring for, you know, in the world we're living in today, you know, an airport, you know, can I use machine vision to track the health of the people going through the airport? I need to deliver a cloud service, essentially at that airport. I have latency issues, I have availability issues. I can't do it from a data center, you know, sitting halfway across the country. It has to be at the airport, but I need to be able to basically have a reliable, consistent cloud environment that now I can put in 10 airports or 100 airports. So it's that combination of location, but consistency everywhere I put it, that's part of what this new story is about. And I think that's the other big part of the message here. Excellent. Rick, so one of the things I, before we get into the numbers and talk specifically about the VMware solution, how do customers get from where they are to these types of solutions? You know, one of the discussions around private cloud is could I upgrade what I have moved to these environments when I think about many of the solutions that are extending public clouds? It doesn't necessarily mesh into what I have today. So how do we get from, you know, the environments that I have today, you know, and how do these local cloud as a services fit into this environment? Yeah, so this is actually one of the interesting use cases for this is, one way you can use this is to deploy this in your corporate data center, where you have your existing application. But yet it's creating that public cloud environment. You can do a lift and shift and leverage this as a way to, I guess you would say now, it's shift and lift because now you can bring it into this local cloud as a service platform, still run it locally, get those kinds of things tested and evaluate. And as you decide which functions you may want to move or offload to a public cloud or add DR, you can use this platform to do that. But I think there's more to it than that. The other part of what we talk about here is, and I think it's something that needs to be addressed as something that helps people do this faster is, these new systems, while very modern, very consistent, there's a lot of value. They, like many of the more modern, converged systems that are coming on the market, have very different power profiles, very different network requirements, than what's in a lot of corporate data centers. And that's one thing we've seen again and again when we've talked to people about deploying these is the technology's great, the solution's great, but I have to make sure I've got the right power and I've opened up the firewalls and all those things that are going there. One thing that I found interesting is we're starting to see companies say, one way to remove that friction is, if there's a co-location facility near the customer site that has great power, has great network connectivity, I can use that place to now deliver this service in days instead of weeks, because it's concentrated there, you know it's a pure environment. And I think that's one thing that's also helping with this shift is people can leverage those facilities and that activity to basically make this migration a lot easier for companies when they want to transform their environment. Yeah, really important points there, Rick, absolutely. We've been telling companies for years, you need to understand what you're good at and what you're not. And pouring concrete and managing power and cooling, there's a handful of companies that are excellent at that. Most of the rest of you companies, you suck at it. So therefore, if you can leverage other people that you can do that. So when you say local, it does not need to mean a piece of real estate that I owned, it could be that spectrum of boasting or the environment. All right, let's get to the numbers, Rick. So we're going to pull up a slide here with some of your research. For years we've been talking about, the private cloud category is huge compared to public cloud because while public cloud is growing huge numbers compared to traditional IT, it is small. So let's take a look at the slides and talk us through what we're looking at here. Yeah, Stu, so this is the thing, part of it when we were talking about this forecast and we, again, we're looking at products like the VMware cloud on Dell EMC and the alternative solutions out there is for part of the use case, which we've talked about, whereas this is the next generation of the corporation's private cloud with better connectivity and better consistency. In some ways, that's the easy activity. But what you're doing is, as we've said, is I'm transferring from a upfront capital expenditure to a three, four year subscription model. And so when we look at this and we started thinking about the forecast and what we're saying is what I've done is I've moved from an upfront spend in one year to spreading it out over three years and from a forecast standpoint, that means in the early years while you may be deploying and a lot of companies are going to be leveraging these in their private cloud, in their data centers, the revenue stream to the provider, in this case, VMware and Dell EMC for the group we're talking about today, streams over three years. So the forecast can look really big or grows very fast, but that's because that subscription revenue keeps growing and growing. Today, when we've looked at some of the solutions that have been out there, you brought up earlier, Rackspace and others as early versions of this, but it's still relatively new. These types of solutions have only really been on the market now for six months, seven months. So 2020, even without COVID, wasn't going to be some huge year. One thing we see actually is that these types of solutions are even more attractive in the world we're living in because they give you that promise of rapid deployment and scale. But absolutely by 2022, that accumulated revenue stream, that subscription stream, both for enterprise and for a growing number of edge use cases, we're talking revenues up and around the five, seven billion dollar range, and that only accelerates. One thing that's not really showing in here yet, but it's also part of this local cloud conversation is the 5G build out and the extension and use of these local clouds in connection with the 5G environment. And that's part of this edge use case too. So absolutely if you want to see total revenue streams here in 2022, as we talked about here, just under $5 billion going from a half a billion dollars this year, but even the biggest growth in the business expansion is after that. And why we think this is, is the value, why people are willing to pay for this is because of that value of consistency, continuous enhancements and a platform for innovation. That's what makes this all come together and why we think this is going to be such a big and important market in the coming years. Yeah, absolutely. And it has an impact on your job, Rick, instead of counting boxes and the growth there, you're now talking to Wall Street about, oh, well, Dell might have shipped X number of boxes, but they can't recognize it over this period of time. So let's talk about the customers though. How does a solution like this, what do you see it affecting their adoption of what they're doing with their overall cloud product? Yeah, and this is the case specifically for VMware cloud on Dell EMC is without a doubt, as we all know that VMware and is a critical part of most corporations, IT environments today. Many of their applications are there, they've invested great amounts of resources and expertise and understanding how to operate and drive those environments. And one thing this does is again, it gives them that ability to leverage those investments and the things they've done there for application design and disaster recovery and sort of management of their IT environment. But now again, use it in this as a service way. So it's definitely one of the big benefits we see is it helps people make that transition, removing the friction of that modernization for a lot of companies if they want to move to a cloud environment. That's step one, I think that's value one. I would say and point out, VMware also now is being very focused on making sure that it's also a strong platform for these next generation cloud native development environments. And that's been added to these platforms and we'll absolutely expect to see this in all the VMware cloud solution. So that's another great part of this is they're again, preserving that ability for their customers to both do better with their existing environment and also have a platform for going forward with these new systems. For us, the big thing is a continued focus by VMware and Dell as partners to make sure that it can scale its ability to operate these environments. One of the things they're making a commitment to their customers, we're going to make these continuously available, available on very good short notice and that they continually improve. And that's going to take a lot of back in investment because really VMware has to now centrally manage not a hundred or a thousand, but potentially tens of thousands of systems for many customers around the world. That's the real next big step there we see is when you can add that fleet management ability. So the company has the ability to say, I can now deploy some great new service in one place, a hundred places, a thousand places, while still being secure, while still offering my end users the availability and the latency that they want. That's a very powerful thing. That companies are going to be able to offer in the coming years. All right, well, Rick Miller's really important items there. I'm really glad you brought up about the modern applications about their data. Of course, VMware's partner Dell has a strong legacy in data. Something IDCs track the explosive growth of that for more than a decade now. So thanks so much. And I think you captured that perfectly. The data control part of this is critical. All right, lots more from the VMware cloud on Dell EMC. I'm Stu Miniman and thank you for watching theCUBE.