 Live from San Francisco, California, it's the Cube at VMworld 2014, brought to you by VMware, Cisco, EMC, HP, and Nutanix. Now here are your hosts, John Furrier and Dave Vellante. Okay, welcome back, one here live in San Francisco for VMworld 2014. I'm John Furrier with Dave Vellante. This is the Cube. We extract the signal from the noise, you get the tech athletes in from CEOs, entrepreneurs, startups, whoever we can get that signal on. We have Pat Gelsinger, the CEO of VMware here in the house, Pat. Great to see you again. Great keynote. Hey, thank you. You've been a great friend of the Cube. Thank you. Five years now running. Just want to put a plug in. Five years? Wow. I want to thank you for this amazing gift of pens we got from the VMware opening campus day. Great pens. Celebrating you guys opening up officially the Palo Alto campus. How's that going? What's happening with the campus? Well, first, the campus opens great. Thank you for joining us there for it. It really was just a fabulous place. I mean, a beautiful campus and, you know, we have the greatest employees, so we wanted to give them the greatest place to work. And so the campus has gone fabulous. We've opened up almost all the buildings now on campus. Just two more to build out and, you know, we're hosting all sorts of wonderful people who want to come in and see the coolest place in Silicon Valley now. It's like, you know, it's like China over there. New cranes going up and putting new buildings up there. Are you guys done with construction there? What's happening? That's expanding like... Two more buildings to go. Two more buildings to go. And then we're done for a while, so. Almost there. Almost there. Right? I got worried when there's so many cranes going around, you know, do I need all my employees to wear hard hats or something? It's like, no, we're soon done with that and we can get everybody to work. So Robin kicked off the keynote for U.K. Monk. You talked about staying in the course and using computing hybrid cloud, so we're going to find data center. Then you came out and laid out essentially the vision of this transformation that's happening. What's the state of your vision there? Expand on that keynote and share with the folks who might not have caught it live. What was the crux of the presentation? Because it had a lot of Pat Gelsinger vision. It felt like, hey, it's transformative. We even had some guests talking about commentary and the announcements. Are they playing defense, offense? You're not a defensive player. You're an offensive player. So talk about the offensive moves for VMware. And how did that keynote strike a chord there? Well, you know, the first one is we really started with this phrase brave new IT. And the nexus of that was all of our VMware faithful, the people, the V-Admins, the people who've been using this, they are becoming critically important to the businesses that they serve going forward. Because not only is it about them doing their job, but with STDC, hybrid cloud, and user computing, it's them redefining the entire infrastructure for the business. And when the CEO looks down across his leadership team, who's the most competent person there to navigate through all of these IT trends that are emerging to necessarily redefine their businesses? And we call this a liquid business. That's changing. So very quickly we're seeing that businesses redefine themselves from education to governments to transportation. Uber today, not owning any assets, has a market cap equal to that of Hertz and Avis combined. I mean, we're just seeing these things emerge so quickly. And who's the smartest guy on technology in the room? The IT guy. Right? And out of that we laid out, obviously, our continuing progression with the software-defined data center. Updates on major projects, bringing those components together in a big way. One of our first and I think most significant announcements today was a lot of the choice announcements. Adding an open-stack distribution. So if you're a vCloud user, and want to have the programmatic ability of infrastructure through the open-stack APIs, you now get it with VMware. We also announced an embrace of containers. And containers, you know, this 20-year overnight success. Where all of a sudden, lots of discussions around containers and how can I use containers as a new app delivery model. Well, the best way to deliver apps for an enterprise? On top of the VMware infrastructure. So we announced relationship with Google and Kubernetes with Docker and one of the leaders in that space early. And how we're going to make them containers without compromise in the data center for enterprise customers. So on the container piece, last year we asked you here on theCUBE about Docker and containers. You're like, oh, containers have been around for a while. What made you go, hey, this Docker thing's got legs? Was it the community thing part of it? Was it the open-source tie-in? Was it the interoperability? And the containers is not a new concept, as you had pointed out. But what's changed for you in VMware over the past year to make that happen? Yeah, and it still is very early. You know, let's be clear, John, that, you know, we're very much in this early nascent phase, right in the hype cycle curve, you know, we're way up. We're probably going to go through the valley of despair, right in this technology. But very quickly, there's a broad set of these third-gen developers that are saying, containers is a cool way for me to package, deliver, and manage app deployment over time. And we're saying, hey, if that is how people want to be able to deliver apps, then we, the preferred infrastructure for delivering apps, we're going to embrace and enable that as well. So it very quickly came together, and we engage with Docker and Google as partners, and they say, absolutely, we want to partner with you in this space. And so all the pieces just sort of snap together overnight, right? We've been working with them, making meaningful contributions in the space. That's a DevOps ethos, right? That's basically cloud, right? Well, you know, DevOps is a funny term, right? Because it was funny, we had, you know, I had a bunch of my guys at the DevOps conference, you know who was there? It was all IT guys, not developers, right? It's really a progression of developers to DevOps into IT. And we really say that DevOps is sort of where developers and IT come together, right? And so we really are trying to enable DevOps to satisfy the business guys. And if I go back to my brave theme, you're seeing shadow IT and developers and line of business go around IT, and IT is now being, through announcements like today, armed with the tools to go to developers and say, oh no, I'm your friend. Yes, deval the shadows. I'm going to enable you with the coolest, most efficient infrastructure, and I'm still going to have it secure and managed as well, right? You don't need to be, right, you know, running in these environments that we can't scale, manage and secure. Your apps now can operate in an enterprise worthy way. Well, that right once, you know, run anywhere concept is very powerful. It is the premise, if I understand it correctly, that you'll bring that enterprise capability, the security and other management capabilities to that concept? Yeah, the VM doesn't change, right? We're adding Docker on top of the VM and enabling it with some cool new technologies like I mentioned, Project Fargo, that actually make that delivery of the container on the VM more efficient and lighter weight than a bare metal Linux implementation of Docker. I mean, that's really powerful. It's really cool that we can do that and we have some cool technologies that we're showing off that enable that to be part of our next major vSphere release. So you touch that base, you touch the open stack, you got some action going on there and sort of embracing open stack, more developers in open stack. VMware has a tough act to follow. I mean, when you think about the whole where we've come from. I mean, it seems so simple now. You know, servers are underutilized, saved. You had a 10X disruptive factor. And now you've got to do it again. I remember Marich used to talk about this deeper business integration. He'd talk about it like this was grand vision, but you actually now have been executing on that. Is that where the next wave comes from? That deeper business integration? You talked about transforming infrastructure. So how do you do it again? Is it a cost reduction? Is it a business integration? Is it, as you say, transforming that infrastructure? What does that mean to the customer from an operational standpoint? If you're the IT guy, do you want to spend a lot of your time worrying about the infrastructure? Actually, what you want to do is have this programmable, scalable, flexible infrastructure that enables you to go worry about the business problems which are in the apps, right? Because you want the IT guy spending all of his time, and those people say, how can I do new application services? How can I enable new business models, et cetera? So he wants this flexible, programmable, secure, managed infrastructure, and he wants to worry less and less about it. And, e.g., it needs to become more automated and more efficient, more scalable. And we walk into that discussion and say, you know, we've earned the right because we've demonstrated more value, more efficiency, more quality of software, and we now have 80% of the world's applications running on top of the software that we do for you, and we've earned the right to show that we can do that for the full data center, to be able to do that both on and off premise in a reliable, scalable, managed, and secure fashion so that we enable you, Mr. IT, to go deliver the environment for the developer. To deliver the environment on and off premise, to secure all those next-generation devices and applications as well. And that's what we're off to do for you, and we deserve a seat at your table to help you do that. Well, and the Federation helps you with that seat. You guys got a pretty big role in the Federation. Yeah, yeah, we do. So I wanted to ask you about the financial analyst meeting. Did you get a lot of questions about that, you know, about the whole spin-out thing and how was that addressed? Actually, surprisingly. Didn't come up? Not a question at all. Why, because it's already come up, right? Yeah, I mean, we've talked about it before. You know, largely, I mean, those things, I mean, EMC is addressing those things. We've been very proactive in our position, right? We think the Federation is the right model, right? It's working, it's delivering value. We're quite committed to it, and we're showing quite a number of cases where we're adding value as a result of it this week. You know, we announced the EMC as one of our EVO rail partners. We announced the Viper-based object service for the VCloud Air service that we announced this week. Announcing new solutions that we're doing with them. So lots of different areas that we're just demonstrating the value that comes from the Federation. Well, we know Joe a little bit. We know it's not going to happen anytime soon. So what kinds of things did come up? Were they nitty-gritty things around, you know, enterprise license agreements, 2015 guidance? Share with us, you know. Lots of questions around 2015. And you guys shared a little bit more, maybe, than in the last year. We gave them framework to go look at 2015. Lots of questions about the strategies that we've laid out. You know, how will this NSX thing play out? How rapidly is that going to grow? V-SAN, how rapidly are you seeing that grow as well? V-Cloud Air, how are you going to win in that business and do it in a, you know, margin effective way for VMware? And how does this V-Cloud Air network partnership work? You know, and based on that, you know, how should we look at your growth profile going forward with your traditional business, as well as these new business areas, and what's that going to look like over 15 and beyond? So those are sort of the nature of the questions. So the Air piece is interesting to John and me because we've been trying to sort of parse through, okay, on a long-term basis, you guys software everything. You talked about that at quite some length. And the business model is great. Marginal economics go to zero. And you see some of that happening with the public cloud, where the traditional outsourcing is starting to follow that software, Marginal Economics line. So my question relates specifically to how your, whatever it is, 4,000 partners, can you replicate that kind of Marginal Economics at volume? Or is it more of a high-touch belly-to-belly model? Well, you know, we definitely are viewing this as the potential for a very scalable model, right, working with service providers who invest substantial capital, who have data centers, who have networks, you know, have unique, you know, governed assets in their own countries that they participate in as well. You know, we're building the stack, right? You know, being prescriptive in the hardware, building the software layer that we need to go with it so that we can operationalize a 7x24 service that scales and do so with this hybrid model. You know, not be over here in the race to the bottom with, you know, Amazons and Googles. We're over here focused on enterprise customers to deliver value of how these things work across the boundary of on and off premise, the hybrid cloud, and enable rich enterprise-class services on top of the platform. And we're going to do so with what we do. We're going to leverage partnerships like Savis, CenturyLink, like the SoftBank partnership, and we're going to enable this 3,900 partners with additional service offerings as well. It's a very effective business model. But you will build out your own data centers or not? You know, we're not building our own concrete air conditioning and networks, right? We're doing a co-low for the core vCloud air offerings for those, but we're enabling our partners to do that as well. So here are the recipes. You go build them and operate it as well. So that's a technology transfer, IP transfer? You know, for that we get a recurrent revenue stream as they go run our software in their data centers and services. So the combination of the two we think gives us a very effective business model for the future. So Pat, last year I asked you about the, you announced the hybrid cloud all in. You made a comment kind of off the cuff. It's a halfway house. Got you agitated. You're the halfway house. And you said, no, it's not, it's the final destination. I took a lot of heat for that. I follow my sword. I'll eat my own words there. But it turns out absolutely correct, right? That's absolutely the destination. That is the number one conversation. It's hybrid cloud, certainly on-prem, off-premise, new economics, value creation. So I got to ask you, and the question from Twitter has come in along the same lines is, you know, ask Pat about moving up the stack. And I obviously want to hear about the end user piece. But inside the hybrid cloud destination, what is the VM where a vision of moving up the stack mean and what does that mean to you? Yeah, and we're drawing the line. Anybody who lays out a strategy, to me, it's more important to answer what you're not doing than what you are doing, right? And for us, you know, we're not doing hardware. We're making that clear. We're enabling hardware partners. We're not doing consumer, right? We're focused on the enterprise customer and we're not doing apps, right? And, you know, we are enabling more services, enterprise services like DR as a service, desktop as a service, but we're not going into the app space. So that's the line that we're trying to draw. Everything that's an enterprise class service where people need, you know, enterprise capabilities, that identity, DR, storage capabilities, things that really are common services for apps to utilize, that's what we're doing, but that's as far north or far up the stack that we'll go. I asked Steve Herrod on our crowd chat pregame on Friday what the hot opportunities are for startups. He said security, or mainly not getting caught at this perimeter-based security. What's your view on that? Well, you know, the crusty, you know, the hard crusty exterior and the soft gooey inside as I described it this morning, my morning breakfast every day. And, you know, with it, right, this whole idea of micro-segmentation at NSX really redefines how you build networks. And that's going to allow us to refactor every aspect of security, every aspect of routing and load balancing, et cetera. You know, we announced the F5 partnership. You know, the Palo Alto Networks partnership is really enabling us to execute on the micro-segmentation use case. You know, it really is transformational about how services and networks are operated inside of data centers. And, you know, we have the pole position here with the NSX platform. One of the most common questions we're getting from the crowd is, when are you going to get a Twitter handle? Oh, you know, I've never been a good social guy. We have an engagement container for you for that. We'll show you the engagement container. Thank you. You can help me out with that. That'll be good. Thank you. I appreciate it. So, on the end user computer, let's go to that part because Sanjay is on board. The acquisition. Give us the update. I mean, it's coming through that. Oh, what a team. You know, Sanjay has been a great leader. We brought together a great leadership team. You know, Summit and John Marshall. I mean, Passion and Aggressive in that space. You know, the combination of the new assets, the AirWatch team, revitalization of Horizon. You know, DAZ is a service on the platform. Right, the new, you know, we just announced cloud volumes. You know, it's very cool, the dynamic app capability. So overall, really coming together, momentum increasing in the marketplace. And Sanjay's done a really fine job, right, of driving us into that area. What a difference a year makes. Pat, we wish we had 34 minutes, which was your record. Just get started, John. I know you've got some, I mean, appreciate your time, but I want to give you the final word. And we talked about this briefly earlier. Everyone always wants to ask, oh, is this a defensive move? You know, what's the strategy? I've never seen you as a defensive player. I mean, in all the interviews we've done, knowing your history, you're an offensive player. You talked about years ago, get out in front of that next wave, or you'll be driftwood. I don't see that defensive. What is the VMware offense? If you could describe the offense for VMware as a company. And answer the question of offense defense. You're making defensive moves, or is it my off base by categorizing as an offense? Well, I think we're absolutely playing offense. Right, you know, if you think about, you know, we're transforming networking. We're transforming the entire data center operation. We're delivering the first truly hybrid cloud. Right, you know, enabling secure managed environments on those devices. So unquestionably overall, we are playing offense. Now, hey, some things I think we should have done sooner. You know, we should have been in the public cloud space earlier. Right of that. And we're having to catch up in that space. You know, the moves that we've taken in the open stack, I think they're pretty well timed. The moves that were taken in containers, I think we are way ahead of anybody else in terms of delivering enterprise container environments in that respect. So I think everyone- How many activity looking good right now? As always. Hey, I just announced one last week. I got more in the pipeline, you know. You know, we're never finished. Organic innovation, inorganic innovation. We're playing both. Right, and we're absolutely playing offense because here we're playing to win because our customers want the very disruptive nature of the products that we deliver with the quality of the brand of VMware. That's what they want from us. And more open source as part of that playbook? Oh yeah, absolutely. See a net grow? Oh, absolutely. You know, we will use open source every place that we can to accelerate the offerings that we bring to our customers. You know, we're not fundamentally changing our business model. Right. But hey, we can add open source components to it and we will and today's open stack announcement is a great demonstration of that. Okay, Pat, put the bumper sticker on this to end the segment. What's the bumper sticker safer this year's VMworld? What's on the bumper right now? What's it safe for VMworld? Enabling Brave new IT. Pat Gelsinger, CEO of VMware here inside theCUBE. Always great to have him. Our fifth year. We love having him on. Great, great athlete, tech athlete. This is theCUBE. We'll be right back after the short break.