 Live from the Wynn Resort in Las Vegas, it's theCUBE, covering .NEXT Conference 2016. Brought to you by Nutanix. Now here are your hosts, Dave Vellante and Stu Miniman. We're back, this is theCUBE. So SiliconANGLE Media's theCUBE goes out to the events. We extract the signal from the noise. We've been here for two days, wall-to-wall coverage of Nutanix.NEXT. We did the inaugural .NEXT. Stu and I, Stu Miniman, my co-host. Last year at the Fontainebleau in Miami, great venue. We're here now at the Wynn, another great venue, nice hotel, small, intimate. The size of the conference nearly tripled from last year. If they do that again, they'll be up over 7,000. They will not be at the Wynn next year, I would predict. Yeah, Dave, last night at the party that they had, I mean, it's 100 degrees outside, but the event guys were like, yeah, Dublin would be great, but you know Howard Ting, so Howard's probably going to try to triple it again. But yeah, it's doubling at this size, would still be impressive. Just like the growth of Nutanix is still going on at a good clip. So seven years ago, Stu, I was in an office conference room in Hopkinson with Chad, and he laid out this awesome vision of where infrastructure was going. And fundamental to the premise that he put forth was infrastructure must become invisible. And that's the messaging that Nutanix is taking on. So two questions, is infrastructure invisible today? Let me start there. Yeah, not yet. It's getting better. Don't need to touch as much. You talked to the Nutanix customers. It's simpler, I can drop it in. It was good to hear a number of the end users that we talked to this week say that, I can give my kid an iPad and they could really like manage this, but that still means somebody's managing it. It's not, there's certain environments out there that just say, oh, well, I do the application and I don't worry about it all. If I deploy public cloud, I don't touch anything. If it's on-prem, there's still something I need to do with it. It was funny, what was the term? They used humanizing IT, almost runs counter a little bit to what we hear about with pets versus cattle. But yes, the simplicity is core to what Nutanix is doing. They're doing a good job there. Hyperconvergence in general, remove some of the major pain points that we've heard from years, Dave. I mean, I know David Fleuer for years talked about migration was just one of these things that kill you on storage. It's over 30% of the total cost of ownership of storage because you spend so much time setting it up, so much time migrating off of it. And when I have a pool of resources that's a software distributed network, like what Nutanix does, it solves some major pain points. But I don't think we're there yet, but that's okay that the messaging's a little bit ahead of where we are today. So not invisible yet, but less visible, right? And then the second part of my question is, does Nutanix have a lead? And how big is that lead? Yeah, so first of all, as an analyst, we say from the number standpoint, absolutely. We will have our updated market revenue and forecast coming soon. If you read the Nutanix S1, last year they did over $300 million worth of revenue, and that's actually not counting most of the deferred revenue that they had from Dell. My number ahead, it's in the 330, the 340 million price for a dollar range. Behind them, there's nobody over 250. As a matter of fact, even if you add the hardware drag, I'm not sure that anybody is trying to remember the numbers, maybe 200, but they do have a significant lead. And despite EMC saying they're gonna take them down this year, David Golden from EMC actually said, oh, it's 2017 when we look to take the lead. So the big guys have huge marketing and sales initiatives to try to push in there. I think Nutanix has definitely thought leadership in this space, they have revenue lead in this space, and they do have differentiation that I think can keep them going and ahead, they expect an IPO sometime soon and helping to propel them. And obviously this show, you've got 2,500 people that are excited about what they're doing, excited about some of the barriers that Nutanix is helping to knock down. Well, and you see, that's why software is a capital efficient business and you figure, okay, you can start software companies for not a lot of money and you can, but you can't thrive, you can't become a dominant software company, which I consider Nutanix a software company, but you can't become a dominant software company without spending gobs of money to thwart the efforts of the big guys to freeze the market. And you're seeing that certainly with EMC and VMware, Oracle to a certain extent, certainly HPE in a big way, really basically trying to freeze the market on Nutanix saying, we have all that too, we're doing hyperconverged, they're talking hyperconverged, hyperconverged, hyperconverged. Nutanix challenge in my opinion is to, and they're doing this is they're pivoting, I'm using the word pivot, it's really not a pivot, they're evolving their TAM into what they call enterprise hybrid cloud, that's what the Acropolis hypervisor is all about, extending beyond VMware into other hypervisors. And in doing so, they're going to make a lot of waves, right, so a lot of arrows are going to be pointed at those guys, but the point I'm making is that the big guys are going to say, okay, we're doing what they're doing, it's really important for Nutanix to demonstrate the business impact of going beyond hyperconverged infrastructure. They're really at hyperconverged infrastructure today, their messaging is going beyond, everybody else's messaging is at hyperconverged infrastructure and they don't have as many proof points, but it's going to happen, it's coming, these big guys eventually will get there, right, look at Microsoft, I mean everybody's very similar with the big guys, right, the one dot oh, man that's so great, the two dot oh is okay, and then the three dot oh is pretty good. I, Dave, when you and I were in Miami last year and they announced the Acropolis hypervisor, I was very skeptical and I'm actually impressed with where they've gone so far with it, because it's not, you know, there's some Nutanix people that say they want to become a leader in this space, but in general, it's, the hypervisor becomes a feature into what they're doing and customers have reasons why they're doing it, you know, saving money, just that, you know, one click, like the amazon.com experience is what, you know, we hear from the executives and, you know, that's nice as opposed to the old, you know, oh, you know, for years it was, you know, when is HyperV going to catch up to VMware and fighting that battle? Nutanix is almost going beyond it and it's just we're going to build a platform, we're going to make it simpler, we're going to use that, so I think they've already moved beyond, Dave, kind of hyperconvergence, you know, we've heard discontent from some of the old VMware partners as to, you know, how they're playing in those environments, but there are, you know, progress beyond, you know, where VMware has a hold and for me, one of the really interesting things they'll be to look at is Nutanix and that VMware relationship, of course, they'll be at VMworld, the Microsoft relationship they announced here, how much does HyperV and Azure play into what they're doing, you know, where does AWS fit into it and how much does the software portfolio of Nutanix grow, you know, they are still a relatively young company, you know, they're in the, you know, second inning, we heard one of their executives said, you know, from the total growth of the company, they've got tons of headroom for TAM, tons of headroom for growth and you talk, it's not a pivot, Mark Leslie said, it's these, you know, kind of arching transformations to build up, so they've got a journey that they've baked out to go to be from hyperconverged to kind of cloud-like to the AWS your way and they're starting to deliver and give some good visibility into where they're going. So we're talking about a company that is approaching a billion dollars, right, in billings. Yeah, the Dell loan said that they've got a billion dollar of, you know, pipeline, you know, with Nutanix, Lenovo's come on and, you know, we'll be adding to that plus the Nutanix sales force themselves, so, you know, yeah, they're not that far off from getting to that run rate and... Well, in regards to the VMware relationship, I think, you know, last year when Chuck Hollis was at VMware, I mean, he kind of laid it out in his blog series. He went after Nutanix very hard as an icebreaker for VSAN and VxRail and, you know, all those V-hyperconverged products, right, and so VMware kind of laid down the gun. Now it's been much quieter since, you know, Chuck has a pretty prolific, you know, blog platform that he utilized, but I think it underscored sort of where VMware and EMC were coming from. Really interesting now with the Dell acquisition, you know, we heard today that Dell and Nutanix have extended their relationship. If they can figure out, you know, the right compensation models for the channel, you know, it could be really nice for Nutanix. Yeah, a great point there. It's funny, I wish I could actually stop in Chicago on the way home tomorrow because Dheeraj Fandy and Chad Sackage are gonna be on a stage together at the Think Ahead event. So we'll be head to head and, but both of them are gonna have, you know, close ties to Dell. I do wanna highlight, Dave, you know, we talked a lot about Dell, but Dell is still, it's a really small piece of what Nutanix is doing. It's a strategically important partner for them, but, you know, there's still just the general channel that they're doing, they're expanding. There were rumors coming into this as to, you know, hey, what about Cisco and maybe even HPE servers being supported and, you know, it would not surprise us to see Nutanix supported on, you know, most compute platforms in the future. Because as you said, fundamentally in their core, there are software companies, so, you know, there's integration and testing work that's very important, but they're above that and trying to move even higher in the stack. So, you know, the individual components, they do want to give their customers choice. So as they do that, Stu, as they begin to support Lenovo and SuperMicro, of course, there's always been SuperMicro, but Lenovo, Dell, how does that affect their value proposition? Is it just a function of, okay, they got to do the engineering and make sure it all works right? Or is it a little bit V-specs-like, if you know what I mean by that? Or it becomes more reference architecture than it does integrated systems? Well, right, so today, both the Dell and Lenovo are, you know, full on, you know, not just integrations, but they're different. If you take, you know, the NX, the HX and the XC and line them up, you know, there are technical specification differences because the server manufacturers all do make things a little bit different. You know, Dell, we talked to them about, you know, some of the VDI special things that they did in there. You know, Lenovo has some, you know, really strong SAP solutions that they're doing there. So, of course, there's plenty of overlap and you can get something that's pretty close, but, you know, there's lots of environments out there and those are three distinct product lines and we'll put a strain on really the engineering efforts as to how many of these can you keep up. Interoperability is a big cost. You know, when we talk to Dave about companies shifting the operational expense to the vendors, you know, that has to be paid somewhere in Nutanix as they grow and they have, you know, dozens of product lines that they need to test and keep up with, you know, that's something that will be an expense that they'll need to have going forward. So, great event, a lot of good momentum coming off of last year, 2,500 plus people. I've often said it's, you know, reminds me of the early days of the early service now. I wasn't at the really early service now ones down in San Diego, but the ones, you know, since they've come to Las Vegas, Splunk.conf show, Tableau, similar kind of vibe. Although those events were much more, are more software oriented. They are, even though this is a software company, it's an infrastructure software company. So, a lot of storage people here, right? So it's a different crowd than those other venues that I mentioned. However, there's a similar vibe, a lot of enthusiasm around what they're doing, a lot of passion leading the whole DevOps charge, a lot of innovation. So that's, you know, sort of one observation. The other, the messaging very strong. You know, this whole enterprise cloud piece is I think right on, you're seeing a lot of business momentum. I think very clearly from talking to people here, the customers, Nutanix has a lead relative to some of the other competitive offerings that they've been testing. I think that there are some blind spots, you know, they're expanding now into new solutions areas. I think Oracle is a challenge for them because of Oracle licensing, Oracle is going to use that as a weapon. You recently wrote about that. I think there's a lot of uncertainty or just a lot of lack of knowledge in the customer base about how to deal with that. So we'll see how that plays out. But that's a niche, it's a big niche, you know, but it's a niche. It's not the whole market. There's plenty of opportunity there. So on balance, you know, sitting in a pretty good position, have to evolve the ecosystem, continue to evolve the channel partnerships and execute obviously on that roadmap that they've put forth, which is a pretty aggressive roadmap. But what's your summary? Yeah, Dave, you saw some really good points there. We talked about with D-Raj that, you know, Nutanix doesn't own the application piece of things. So companies like IBM, Oracle, you know, are a threat. Microsoft's interesting partnership, but of course, I mean, Microsoft's going to partner with, you know, other parts of Dell with HPE, you know, where does Nutanix fit? They're a really small company in there. AWS, you know, Nutanix has a hybrid cloud solution, yet, you know, we know that partnering with AWS is difficult. AWS is going to try to capture that value. So, you know, there's some interesting challenges up ahead, but they've got plenty of growth. Think, Dave, I want to, you know, ask you from a financial standpoint, we came in looking at the IPO. Twilio is going to IPO tomorrow. Just saw it, you know, breaking on the wire. So, you know, there's tech company finally going through, you know, you've had a little bit of chance to dig in, ask some questions. You think we're going to see an IPO this year? And, you know, did you believe kind of the messaging from Nutanix as to the bridge loan and everything else that they're doing? Oh, no, I definitely believe the bridge loan message. I mean, they needed the money. I mean, I, you know, basically said, we don't need it, that's why we're taking it. But you, even if it's insurance, you need that insurance. So, you know, you don't want to go sort of without that safety net. And so, and the IPO obviously would have provided that. And then some, I would say, you know, if the market condition, if we get a summer rally, no question, you're going to see that IPO happen. You know, they're in that sort of, you know, a purgatory state right now where they're really updating S1s and so forth. Numbers still look really good. Very high growth, gross margins up ticked substantially in the first half of 2016. I mean, talking from 56, 57 up to 62%, you know, four or five point increase in gross margins. And of course Nutanix is downplaying that. You know, they don't, you know, I was asking a lot of questions about that. Like, what's driving that? I mean, that's really impressive. Like, we're trying to keep gross margins up. You can't manage, I mean, you can, but generally speaking, good companies don't manage, don't try to manage gross margin. You know, what they try to do is, you know, deliver value to the customers, you know, give, get good pricing. And the gross margin is a calculation that takes care of itself. But it's a, to me, a very strong indicator that Nutanix is able to convey its value proposition and get premium pricing for that value that they're creating. So I thought that was a very good sign. I think if Trilio goes well and, you know, the market stabilizes, there's still a lot of, you know, skepticism in the market. People aren't buying this little rally here. We'll see what happens with Brexit. I think that's going to have a big impact. I think if, in my personal take, if, you know, the UK stays, that's a positive thing. If it doesn't, that's yet more uncertainty. You know, I think, most people would say there's going to be choppy market through the election. You know, so, you know, maybe once we have visibility on that, you know, we'll see it in the fall. Yeah, so I mean, Dave, you know, Nutanix is not an open source company. It's a premium brand, you know, in some ways it goes against some of the things that we talk about. When I hear them position it, it sounds a lot like what we talk about with AWS and even with Azure, but it's bringing it on-prem. So it's interesting to see the kind of the business model matching some of the technology. We talked a little bit about just organizationally how Nutanix is trying to grow. I mean, 1,700 people, you know, it's tough at that size to keep growing at a decent pace and getting good quality people and retaining them. They've got high NPS scores, so, you know, Nutanix. They've got a good thing going. Can they keep the momentum without having, you know, some of the, you know, do not enough wheels come off that they can't, you know, patch them while they're running? Well, I think there's two, I think that you're bringing up some good points too about, especially about AWS. That may be another blind spot. I mean, I think there's an implicit assumption in Nutanix, you know, model, their business model, financial model that, you know, guys like AWS, they'll grow, but their growth will slow. You know, they'll end up at 30 billion, whatever. What if AWS gets to 100 billion? That could be a change, you know. To me, that's not out of the question. We've talked a lot in theCUBE, Wikibon, SiliconANGLE Media, about the marginal economics that AWS is driving. I think people still don't understand how powerful the AWS business model is. Go dig into their operating profits, compare those to the likes of EMC, for example, which is an incredibly profitable infrastructure company. And Amazon's numbers are below them away, right? So we're talking 10 billion this year. They'll probably exceed that in a very, very profitable business that Amazon can use as a weapon. And I think it will. It is on that flywheel, more so than any other company. We saw it with Microsoft in the 80s and 90s, how it used that advantage. And I think AWS is going to do the same. And you know, at the end of the day, everybody kind of poof poofs the economics. Oh, it's not about economics, not about economics. And I understand there are other factors, but economics rule. And if Amazon is significantly more cost-effective than everybody else, that's going to have greater disruption of market. And frankly, I think we're seeing that already. I think that's one of the reasons why Amazon is doing so well and it's so profitable. You know, one of the future-looking things that was talked about here is, can I have application mobility? Can I, you know, put it in the public cloud and bring it back? Applications that are spread between locations? Of course, we had John Furrier, Brian Gracely and theCUBE out at DockerCon this week. And it's simplifying that application deployment. The Docker data center, the new version of 1.1.2 of Docker integrates orchestration into that. And here, we had Nutanix talking about how containers fit in, they're going to have Docker support, they're going to put into the persistent storage piece. So, you know, Nutanix is aware and trying to, you know, skate to the puck of that new piece. So bare metal, virtualized machines and containers manage those within a single environment, their prism tool. So it's an interesting way to go. It's in a place they need to go. But, you know, there's technical challenges, there's customer adoption that we need to get there. But it's been impressive to see. Okay, all this content that we've been creating over the last couple of days, of course, is up on siliconangle.tv. Check that out. Follow theCUBE at theCUBE. Check out on Twitter, hashtag cube gems to see the snippets that we produced. Kristen Nicole's team has been cranking on live blogging. As I say, Patrick's been going nuts on the cube gems, awesome job. Jay, always good to see you, local Vegas boy. Alex, welcome aboard, you know, right out of college. Throw him right to the fire. Greg has always great job. So appreciate it. Jeff Frick also, you know, giving us air cover remotely. And Stu, really a pleasure. Great job by you this week. You really know this marketplace, this ecosystem. You're like a rock star around here. There's Stu, and so thanks for all your insights. Thank you so much, Dave. It's always a pleasure to come do an event with you and the team. And yeah, the Nutanix ones, as you've said, there's some of these shows where the, there's the reality distortion field a little bit because everybody loves what's going on here. Like, you know, as I said, Service Now Splunk, some of those. So these are fun shows to do, even in, you know, what would, to quote, you know, YY, the CEO of Lenovo. You know, boring old infrastructure, which is, of course, our bread and butter, at least, you know, the stuff I cover. All right, so that's a wrap. Next week, we're at Red Hat Summit. And what am I missing? The Hadoop Summit. And Hadoop Summit, of course, in San Jose. You know, the big Hortonworks event. And of course, Red Hat, Red Hat Summit is an awesome show. Two great shows next week. So look for that on siliconangle.tv. Check out wikibon.com for all the research. Siliconangle.com for all the blog. And as always, check out crowdchat, crowdchat.net. Thanks for watching, everybody. That's a wrap. The Cube, signing off.