 Live from the Moscone Convention Center in San Francisco, California, it's the queue at Oracle Open World 2014. Brought to you by headline sponsor Q-Logic with support from HGST, violin memory, and MarkLogic. And now here are your hosts, Dave Vellante and Stu Miniman. Welcome back to day two, San Francisco. This is Oracle Open World, and it's our pleasure to be here. This is our fifth year at Oracle Open World. All started in 2010, we sort of snuck in, we're at the Q-Logic booth, and we've kept that tradition up now for five years. Our friends at Q-Logic have been really generous with their booth space allowing us to broadcast here live from the show floor, bringing you the innovations at Oracle. We talk a lot about what's going on at Oracle and what they're doing in cloud, big data, Oracle coming to the cloud, last year announced 12C, this year talking about how they're bringing the three layers of cloud to their business model. Infrastructure as a service, platform as a service, and software as a service. So you think about that, Stu. Infrastructure as a service, you haven't really thought of Oracle as an infrastructure player. Of course, they bought Sun and they're certainly selling a lot of infrastructure, but they're going all in there. The platform as a service to Oracle is really database, middleware, Java, sort of the Oracle tool set, which is, when you look at what Cloud Foundry's doing, they have maybe a little different take. Clearly Salesforce has a different take on pass. Red Hat as well. So Oracle, Red Stack, and then of course the SaaS portfolio is enormous. A lot of buy-ins, a lot of organic stuff, investments, but a massive portfolio led by the applications, which as we all know, applications are what drives infrastructure. So strategy makes sense. A lot of people are not going to buy into it, but a lot of people are. So other stuff that's going on, Stu, love your comments on what's happened with Oracle's version of converged infrastructure, engineered systems. Love to get your thoughts on Oracle's OpenStack distribution, what they're doing there, your thoughts on what Oracle's doing in the Cloud. So what do you think? Great Dave, thanks. Glad to be able to join you here. Lots of coverage from Oracle Open World again. And right, as you said, most of the infrastructure companies start by building a platform or building this solution. Oracle starts with the application, Dave, and it's the expansion of the Red Stack. So Oracle was one of the first converged infrastructure solutions out there. Full of Red Stack, put everything on it, and as David Foyer, our CTO at Wikibon, has said, the further up the stack you go, there's exponentially more value there. So since Oracle really owns some critical pieces in the application market there in a great position, not only for the converged infrastructure which Oracle's doing with kind of the exologic, the exa, all the exa-family pieces of it, but they're taking Red Stack to the Cloud, as you said. So infrastructure as a service, all the SaaS applications they have, and starting to see some past discussion here, also at Oracle Open World. I thought it was interesting, the keynote Sunday night, Oracle was saying they're all in. Dave, you've mentioned many times how Larry a couple of years ago said, Cloud's nothing but water vapor, and now very heavy with the cloud messaging. The keynote this morning with Thomas Currian was very much about analytics and Hadoop, and most of the industry watchers saying, Oracle's messaging might be a couple of years behind what kind of the bleeding leading edge companies are doing, but when I look at things, I say, well, if you're two years behind the bleeding edge, you're probably right where most of the early third of the companies that are going to adopt this are ready to take it. So you don't always need to be that first company out there to get those first 20 or a hundred companies doing it. Oracle has a huge install base, and therefore they are ready to follow fast enough to get all of their customers on top of it. I want to key on something you said about water vapor. That was sort of the Churchill Club interview that Larry Ellison did with Ed Xander. And I go back, I listen to that interview a lot, because Ellison is so intelligent, he's such a great historical perspective. I go back and I listen to that, and what he said there was really interesting. He was talking about, and it was several years ago, I don't know, three, four years ago when this was broadcast. And he was talking about how people who criticize Oracle say, oh, you're cloud, you're screwed, you're screwed because of the cloud. And he's like, why, what's the cloud? What's the cloud, water vapor? And his point was, no, the cloud is in a data center and it's infrastructure and operating systems and storage and memories and microprocessors and databases and all this stuff. And essentially what he was saying at the time was, we're not screwed, we have all of those things. And the cloud really is a business model. And what Oracle has done is said, all right, we're going to go all in the cloud, we're going to start recognizing cloud revenue, rental revenue, we're going to recognize it as deferred revenue on a monthly basis or however they sell it. I'm not sure if it's monthly. My guess is they lock you into a longer term contract. I know guys like Workday do, even though everybody talks about paying by the drink, we got to peel back that and really see how the pricing works. I want to have some other comments on that later today. But essentially saying, we are now going to start to recognize revenue on a rental basis. And that's going to shift from a upfront one time, big hit with a little bit of maintenance every year afterwards, which adds up as we all know to a monthly base. That's going to transition, but they're running now at almost $2 billion a year in cloud revenue as you count it, as they count it. Dave, a question for you. When we went last year to Amazon re-invent, we saw plenty of customers that were doing test dev and using Oracle in the cloud. So does Oracle look at that and say, wow, we can't let the big public cloud guys just take our stuff because that pulls some of the account control, that pulls some of the revenue away from us and this is reactionary? Or where's the play for Oracle? I think Oracle has said, and again, I think Larry didn't say at the time when he bought Sun, I mean, I always felt he bought Sun for Java, but as he realized what the assets that he had, Oracle said, okay, we can now sell infrastructure. We can sell middleware and database, which we have always done. We can sell applications, which we've always done. We can wrap them into one. Hey, we can actually increase our revenue and at the same time go to customers and decrease their costs. Hey, it's a win-win. Now, again, the devil is in the details. As I said, I know, for instance, I talked about Workday before, Workday will price in, I think, at least a two-year, maybe even a three-year contract. Amazon, you swipe credit card, you get out any time you want. Now, people will argue it's not so easy to get out. I hear you, but you truly pay by the drink. You don't lock into a long-term multi-year contract. You truly pay by the drink. Now, some people may want to lock into a longer-term contract on fixed pricing, but nonetheless, yes, Stu, I think absolutely they see what Amazon's doing with the bring-your-own software and they say, well, wait a minute. We don't want to lose account control to Amazon. The second thing Amazon's trying to do is really essentially strong arm the software companies to be in the marketplace. A lot of companies love to be in the marketplace. That's a great distribution channel. Believe me, Oracle does not want to be selling software in the Amazon marketplace if it doesn't have to. It doesn't want to market itself as, hey, we're in the Amazon marketplace. Go to Amazon and buy our software. No, Oracle wants you to buy its own software on its cloud platform, so very perceptive of you. I want to ask you about Oracle's announcement last week. I think it was last week on their OpenStack distribution. What's the deal? Everybody, VMware has an OpenStack distribution. Now, Oracle, what's going on? Yeah, Dave, so it is a little surprising because Oracle's not the first company that you think of when you think about open source. But as we've talked about many times before, there's a couple of really big cloud players out there, the Amazon, Google, and Microsoft being the three big ones. And for everyone else, if they can converge on a standard solution that allows some application portability and interoperability, OpenStack shows that promise to be able to be that platform for public clouds, like what IBM is doing, what HP cloud is doing with the Helion project. And companies like VMware and Oracle look at OpenStack and say, well, we need to get on on this. If there is a growing ecosystem building around it, they need to get involved. Now, what I find kind of interesting, Dave, is if you think about the early couple of years of OpenStack, one of the big things that people looked at was it was a way not necessarily to compete against Amazon, but to get people off of VMware's licensing. Well, John Furrier called it a Hail Mary against Amazon when he first saw it, which I thought summed it up nicely. And really what I saw is it was the, a lot of enterprise players saying that the easy way to save you money is if I can take that vSphere licensing away from you by moving to KVM. So move to open source software and potentially move to more commodity hardware. So that was why VMware's integrated OpenStack was kind of an interesting move to try to get involved there. And I think you're seeing Oracle also looking at it, saying if there's so many players involved here, many of who that we want to work with and customers are asking about OpenStack. It was said, I think at VMworld, that OpenStack's won the marketing wars. If you're not going to a big public cloud, the alternative that you're going to look at either for in-house to build your private cloud or for another service provider, you're asking, is it OpenStack compliant? And so Oracle made an announcement, Dave, and it's building off of Oracle VM. So what's a little bit interesting about that is while most people are building OpenStack based on KVM and, of course, VMware's building things off of their own hypervisor, Oracle's KVM, I'm sorry, Oracle VM is built off of Zen at the foundational layer. So getting everything to work is going to take some time. There's actually a pavilion here at the show floor or just a couple of rows over from where we're sitting where there are a number of partners that are trying to help Oracle get deeper involved into what's going on at OpenStack and get everything working. So, and now we mentioned OpenStack, talking about vSphere pricing, and I think it's introduction or sort of initial ascendancy, I think coincided with the summer of discontent when VMware cocked up the vSphere pricing. So you're talking about the VTACs, you know, kind of debacle that went on. Tell people about that, Stu. Yeah. And I guess my point is that people were sort of happy, you know, there was a real big fun kumbaya in the VMware ecosystem, but that was like a big red flag to a lot of customers that went, whoa, we just got whacked. We just get kicked in the head. So if I remember right, it was actually with vSphere 5 with a lot of kind of interesting new features, it was kind of overburdened by VMware was going to change their pricing model. So it was, you know, rather than it was, you know, kind of questionable as to what was going to be more owners for big companies, more owners for small companies moving to, rather than it was, you know, per core pricing, which people were quite concerned about as opposed to per server. Kind of how Oracle prices its database. But so anyway, so what's Oracle's play with OpenStack? What are they really trying to accomplish here? So two things, Dave. First of all, from a cloud standpoint, if Oracle's going to build a cloud, if customers ask, is this based on OpenStack, they're going to want to be able to say yes. So just as VMware and companies like Rackspace can say, you know, OpenStack is a key component of what we're doing, reduces customers' concern about potential lock-in. As you said, can I get it off of that, but not have to completely change my processes? Secondly, it is looking to extend what Oracle's doing with Oracle Linux and Oracle VM. So if you, the distribution of Oracle's OpenStack, my understanding is if you already have a service contract on your Linux with Oracle or Oracle VM, that you're just going to extend that into OpenStack. So in many ways reminds me of what Red Hat is doing. There's a lot of kind of stone throwing in the community right now that you need to be open and you need to inter-operate with everything, but really what you need is you need a distribution that can support the enterprise, that has the feature set that I need and has support that backs it. And it's going to be tough, of course, for any one vendor to support the couple of dozen distributions that are out there. So Red Hat kind of put their distribution out there. Oracle is having their distribution, VMware has their distribution. So you know, but just the point I'd make, Dave, is the 451 put out the first forecast and revenue tracking for OpenStack and while 70% of deployments today are private environments, kind of private cloud deployments for OpenStack, almost all of the revenue for OpenStack today is in the service providers. It's company like Rackspace and others that are standing up services that companies can go use where all the revenue is. And even if you go out a few years from now, that's where those really public cloud deployments with what, similar to what IBM and HP and now Oracle are building is where the revenue in OpenStack is. Well, as you know, Stu, from April to June, I was doing quite the road tour speaking to end practitioners, many Oracle DBAs and other infrastructure pros and every city I went to, as I said, to 12 of them, I asked customers, who's using OpenStack? I actually began asking, who's even heard of OpenStack? Because so few people were using it. And so in the practitioner base and the customer base, very limited adoption right now. It is the cloud crowd that's actually adopting it. But I guess my point is, it sounds like Oracle's had somewhat of a change of heart in that, for example, it used to be very negative on VMware. Now you're seeing the storage group was at VMworld last year. It's announced products that are integrating with VAI three or four years after it was all the hubbub, but still doing it. And it seems to me that they're doing something similar with OpenStack, recognizing, look, some of our customers are going to want this. So let's make it easy for them. And then there's the cloud, which the cloud is for them, I think, all about, hey, we got Spark, we got OVM. Let's hide all that. Who cares, right? As long as it works, customers aren't going to care. Now they get hardware, essentially, for the cost of the product, right? They don't have to buy hardware. I'm sure there's internal transfer pricing, but nonetheless, it's Oracle paying itself. And they've got the non-recurring engineering charges and software, but then they've got their, essentially get their software for free. So for instance, Salesforce, they got to pay Oracle licenses. You know, Oracle wants to, Oracle's got a totally vertically integrated strategy. It is back to the IBM mainframe. So pretty interesting. Stu, what's your take on what's going on with what Oracle calls engineered systems? Others have called it converged infrastructure, single managed entities, whatever you want to call it. But essentially, this notion of compute storage and networking coming together, and in the case of Oracle, hardware and software engineered together, it's differentiated in the market. Isn't it what Oracle's doing? Well, absolutely it's differentiated, Dave, because it's the full red stack and you get the application with it. So there are very few of the kind of converged infrastructure solutions that come pre-loaded with your app. Most of them come pre-loaded with a hypervisor. IBM is really the only other one, right? Yeah, and even IBM, if you look at it, IBM had 2,000 solutions listed on the PureSystems page. And when I kind of dug into it, most of those were just kind of existing solutions that IBM Global Services has been doing for years. When you say how many of them actually ship out of the factory with everything pre-licensed and already done, there aren't that many of them, even from the IBM solution, from my understanding. So Oracle got it started in HP. And Dave, you were absolutely right. Convergence is doing well across the board. VCE, from what I've heard, Q1 and Q2 this year was 50% growth year over year. And even Oracle, which has some challenges in growth, might be throwing off revenue. Last numbers I heard was 10% growth in the last quarter on their Exis systems. Yeah, it's the third of their hardware business today. And they said they've done three billion year to date. It's just a big number. I still get the feeling they're sort of jamming it down in customer stores. Again, on that tour, I asked a lot of customers who was using Exadata, et cetera. The people out there, it wasn't quite a third, but that was six months ago. But, you know, it wasn't dominant either. Now Oracle's strategy is, as you say, different. It's to ship the application. So it's a narrower value proposition than, say, a VCE, but it's deeper, right? Further up the stack, as David Floyer has pointed out, you're going to get more value, but you can't build a horizontal infrastructure on top of Exadata. Right, no, right. If I want to build my business, I have more than one application. So I need to look at other pieces. You're not the entire solution, and that is a limiting factor for Oracle, that all the other conversion hyper-converged players are going to go after. It's interesting, Dave. I'm curious to, we're going to have Mike Workman on a little bit later, you know, what his take is on the whole hyper-converged trend. Because, as you know, Dave, we think that this really is the future of where storage architecture is going. So those that you aren't familiar talking about scalable compute and storage that can really scale out and grow, that can be a platform for all of your applications. This is what the hyper-scale companies use. It's what we call server-san for the enterprise. And, you know, what's that going to mean for Oracle? There's a lot of discussion about kind of in-memory database, really a high-performance type solution, but as a platform for everything, I'd like to see what Oracle thinks about that. Yeah, I'm sure he'll have an answer. I don't know if you'll like it, but he's been around the block for a while now. And yeah, Mike Workman will be on later today. We've got a number of practitioners coming on today. We've got a good lineup. We're going to have a little flash discussion with Eric Herzog from Violin. I think cause is coming on. Cause is an alpha geek. And I mean that with all due respect with WANDISCO. One of the original contributors to Hadoop, part of that inner circle in the Hadoop open source world, cause is like really a genius. Can't wait to see him. We have Scality coming on, CEO of Scality, Jerome LeCotte. And am I saying that right? LeCotte? LeCotte? Jerome LeCotte, who's from France. And the floor is coming on. CTO of Wikibon, he's going to give us his take on a lot of the stuff that's going on. And all kinds of stuff. Pika AIDS coming on, Actifio. So, and we've got the other cube going on at the Cisco booth. So we're here live at the QLogic booth. John Furrier and Jeff Frick are at the Cisco booth interviewing a number of practitioners and technologists over there as well. You can go to live.siliconangle.tv and you can see the two channels and you can choose the one, and in the schedules you can choose the one that most interests you. But we will be here all day today. And you can tweet us, he's at Stu. Great handle, one of the best. I'm at D-Velante, signed up on Twitter a little bit later than Stu, obviously. And Dave here in the QLogic booth, we're in booth number 1337, which any gamer knows of course means that we are the elite booth at Oracle Open World. And our techs are going crazy at that. Exciting. Dave, we're talking about OpenStack and everything. One of the things I want to look is, is there any bit of a developer community at this show? How many hoodies are there? You and I are here in the suit and tie. When I was at OpenStack, I was wearing jeans by the time I was done with that show. And so, is there any bit of that developer community or is this just the core database, DBA type practice? Java one's going on. That's up at the Hilton again? Yeah, it's across the street. So there's a big crew there. We've heard about 8,000 times that Java's the number one programming language in the planet, which is a fact. So a lot of people develop in Java. A lot of the born in the cloud guys go, oh yeah, okay, whatever. But hey, Oracle's making it work. Okay, so Stu and I will be right back after this. We're live, this is theCUBE. theCUBE is our live mobile studio. We bring it to events like this, extract the signal from the noise. We'll be here all day today. Thanks for watching and we'll be right back after this word.