 The Cube at EMC World 2014 is brought to you by EMC, redefine VCE, innovating the world's first converged infrastructure solution for private cloud computing. Brocade, say goodbye to the status quo and hello to brocade. Welcome back to Las Vegas, this is Dave Vellante and I'm here with my co-host Stu Miniman. We talk a lot about the cloudification of information technology. It's really taken the world by storm, the cloudification, the sassification. It is the future and the future is now. Matthew Lodge is here. He's the vice president of VMware's vCloud Hybrid Service. Matthew, thanks for coming on the Cube. It's a pleasure to be here. So give us the update. What's happening with vCloud Hybrid Service? When you guys announced, a lot of people had questions. How's it going? What's the uptake like? People loving it. Yeah. What's going on? So we've accomplished a lot in the last six months. We went to GA in September in the first site in Las Vegas and since then we've extended out to five sites. So we added West Coast, East Coast, Dallas, Texas, the UK in Slough, west of London. We have the second UK site underway. We've launched our desktop as a service. We launched DR a couple of weeks ago, Disaster Recovery to VCHS from VMware Environments. This week we launched with Pivotal, Pivotal CF in the one-click deploy onto VCHS there. We also made some price reductions this week and introduced a new storage tier. So we've really been cranking away, oh, government cloud, in conjunction with Carpathia for the federal marketplace. So we've been busy. So Matthew, I wonder if you could take us back to the sort of impetus for the cloud hybrid service. I mean, we've certainly observed that the large cloud players, the public cloud guys, the hyperscale folks, the benefit from having, Paul Moritz talked about this years ago, the benefit from having high degrees of homogeneity. And so that was always, I think anyway, the VMware strategies, let's get a lot of homogeneity between the on-premise and the cloud piece. It'll make things easier. It'll allow us to enforce the edicts of our organization from the standpoint of compliance, security, audit, et cetera. So that is conceptually what was put forth to the marketplace, but it seemed like the market wasn't moving fast enough. And so you guys announced this service as a way to really prove the market, catalyze the market. Is that right, or is it beyond that? Essentially, it's two things. First of all, customers demanded that we deliver as a cloud service. They were very clear that was a part of their future. And so there's this secular shift underway to public cloud infrastructures. At the same time, the other thing that we heard very loud and clear from customers was it was incredibly difficult for them to extend what they currently did into public cloud infrastructures, because it was fundamentally radically different in terms of how it was architected and in terms of how you built applications. Which was great if you were building a website for the first time or you were doing a brand new application. But that led to very narrow uptake in enterprises in particular, because the challenge for them is the transition. They're bought off on the destination, but the challenge is the transition. So Matthew, when VMware first launched the service, there was a lot of partners that were involved. And now VMware hosts vCloud hybrid service. And can you give us the update as to really kind of the go-to-market and the channels and the partners, who's selling it, how many people are selling it? And is there anything you can tell us about just, I know there's great interest from customers, but I don't know if there's a number of customers using it or any revenue that you can share. Yeah, so let's talk the partner angle first. So in time of VMware, partner channel can sell VCHS. And we worked very hard in the first version of the service to make sure that channel partners could transact this in exactly the same way that they transacted business with VMware today. They could take on the billing responsibility if they wanted to. So particularly important for professional services and managed services partners, value-added resellers, SIs, the kind of people who are taking cloud infrastructures and ingredient and building a solution for a customer. So we want to make it very easy for them to integrate with what we did. And then EMC is now also selling VCHS. So you've heard about that this week here at EMC. Yeah, it's an important move. I mean, EMC is now, it's in the sales guys and all their channel partners that's in their bag. It's in the bag. They have a quota for the service. And we've already closed the first deals as a result of that collaboration. So in terms of where we are with customers, we're ahead of where we thought we would be in terms of our forecast. And so we're very happy with the uptake. And disaster recovery has been a particularly popular starting point for a lot of our customers. Yeah, if I look at that channel, one of the questions I have is, how do they make money on this? Because you're hosting it, you put together a lot of the stack. What can they build on top of it? Or how does the channel is a dollar driven machine? So how do they make money on this? So a couple of different ways. They obviously make money reselling the service, but the real revenue opportunity is in helping customers and turning that into a solution. So what do I mean by that? So it's being more concrete. If you're, let's say, a medium sized IT organization and you want somebody to essentially help you run your IT and maybe run the things that are important to the business but not differentiating for you, then a channel partner is going to be looking at the infrastructure service, which is great. But you need to manage the applications running on that service. You need to do things like patching and upgrades. All of the everyday run IT functions. And that's crucial role that partners play. Another example, disaster recovery. So we've got a very simple, very cost effective, very easy to use service, right? You can install this on your own if you want to. But fundamentally, a lot of organizations want somebody else to worry about that. So somebody else to manage that, maybe do an application assessment, figure out which applications can be protected, which ones don't need to be, which ones need to have on-premise DR or maybe Synchronous, something like that. There's plenty of opportunity there for partners, and particularly in the managing of IT running on top of cloud infrastructure. Okay, I wonder if we could talk a little bit about the competition for a second. Yeah. In the keynote, it was said that, you know, VCHS is maybe the first and best, you know, when it comes to hybrid, pretty audacious claim. Right. You know, everybody likes to compare Amazon with it, but I think the more relevant, you know, comparison is if you look at what Microsoft's doing with Azure. Microsoft has a cloud-first strategy. The way that they build things is they put it as Azure in their public offering, and then they push that down to the private. Of course, lots of customers have, you know, Microsoft in their environments. It still has to be the number one VM, I would think. You know, under VMware. So, you know, I think you have to give Microsoft kudos for kind of their hybrid strategy there. You know, do you think that's a fair assessment? You know, how do you think you guys stack up there? So, you obviously have a lot of respect for Microsoft and what they're doing with Azure. I think the argument that we would make is that it's really about the applications and the challenge for a lot of the hybrid cloud contenders is the breadth of application support. And it's one of the reasons, for example, that the DR, our DR service, we think is really a game changer because we can support any application you run today. And that's just not true at our competitors. And that makes a big difference. And that, we think, is one of the key differences between ourselves and Azure. So, I wonder if we could follow up on that. So the AWS mentality, you know, when you go to re-invent and you listen to the marketing pitches, guys like Andy Jassy will say, our belief is that there will be very few companies that own their own data center in the future. And then you listen to Joe Tucci and others, Pat Gelsinger, Paul Moritz in the past. We believe there will be many more private clouds and hybrid clouds than there will be public clouds. So, can they both be right? Or is that just different ends of the spectrum, different philosophies? I think it's unrealistic to say that everything is, everything's going to end up in the public cloud in the future. And this is coming from the public cloud guy, right? At VMware. So, when you take a look at what customers want to do, it's very pragmatic for them. It's like, look, I've got some, I've got workloads, I've got applications, I've got things that, it doesn't make any sense for me to move these. You know, software-defined data center makes a lot of sense around standardizing and automating the infrastructure underneath those applications. But fundamentally, is it going to drive value for my business if I take all of those to public cloud? So, why am I spending time on that? And then, I mean, then you have all the regulatory concerns and we can argue about whether, you know, those are valid or not, but they're a fact of life. And I know for a fact, for example, that some parts of Amazon's payment infrastructure does not run on AWS and runs on private IT infrastructure for that very reason, right? And so, for my customers, it's just very pragmatic. It's like, look, I'm going to have both in the future. And we can argue about how big those are. You know, how does, how big does public cloud get? What does that do to what happens on-prem with private cloud? There's obviously going to be growth in both of these different areas. But that's one of the reasons why hybrid is so compelling for our customers. You know, some customers see it as a transition strategy to all public. They got customers who want to get out of the business and running their own data centers. And other ones just see it as like, this is where we're going to end up. We're going to have some of our own stuff and we're going to have some of the public cloud. Matthew, so when some customers look at going to some off-premise solution, one of the things that they're looking to things like open source and to get rid of licenses. I mean, Oracle had this challenge, you know, a lot of people don't want to pay the Oracle tax. Microsoft has had that challenge and we hear in the marketplace that, you know, there are people that don't want to pay the VMware license fee. Is there anything that VCHS does to, you know, adjust or be more flexible on licensing? Well, I mean, fundamentally, we are a pay for use cloud infrastructure, right? So you pay for a virtual machine. You don't pay separately for any licenses for VMware vSphere or whatever else. And so we can have the opportunity with the cloud service to make things a lot simpler. And fundamentally, we have to compete with the rest of the marketplace when it comes to software licensing costs and, you know, our management stack, we're going to compete with the other management products in that space. And, you know, that's just the nature of the marketplace. The challenge with open source is that, you know, it's only free if you don't value your own time. And many organizations, you know, they, if they want to run and manage open source, they know they're going to have to take on some of the burden of doing that themselves. And so it's a trade-off, right? There is no free lunch here. And you can either staff up for that or you can pay a vendor for it or do somewhere in the middle. And so I think, I think the licensing thing is not really what we see as being the differentiator for open source, what the differentiator for open source is. The fact that I have the code, I can do my own enhancements to that if that's what I want to do. I can, I have much more transparency over what is in the offering. And fundamentally also for developers, where they have to understand exactly what the code is doing, particularly for integration products. Okay, we have to leave it there, Matthew. Thanks very much for coming on theCUBE. Appreciate your insights and good luck with the challenges and opportunities ahead. All right. All right, keep it right there, buddy. We'll be back with our next guest. This is theCUBE, we're live from Las Vegas. This is EMC World 2014 and we'll be right back.