 From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hi everybody, welcome to this CUBE Insights powered by ETR. In this breaking analysis, we're going to look at recent spending data from the ETR spending intentions survey. We believe tech spending is slowing down. Now it's not falling off a cliff, but it is reverting to pre-2018 spending levels. There's some concern in the bellwethers, specifically financial services and insurance accounts and large telcos. We're also seeing less redundancy. What we mean by that is in 2017 and 2018, you had a lot of experimentation going on. You had a lot of digital initiatives that were going into not really production, but sort of proof of concept. And as a result, you were seeing spending on both legacy infrastructure and emerging technologies. What we're seeing now is more replacements. In other words, people saying, okay, we're now going into production, we've tried that, we're not going to go with A, we're going to double down on B. And we're seeing less experimentation with the emerging technology. So in other words, people are pulling out actually some of the legacy technologies and they're not just spraying and preying across the entire emerging technology sector. So as a result, spending is more focused, as they say. It's not a disaster, but it's definitely some cause for concern. So what I'd like to do, Alex, if you bring up the first slide, I want to give you some takeaways from the ETR, the Enterprise Technology Research Q4 Pulse Check Survey. ETR has a data platform of 4,500 practitioners that it surveys regularly. And the most recent spending intention survey will actually be made public on October 16th at the ETR webcast. ETR is in its quiet period right now, but they've given me a little glimpse and allow me to share with you, our CUBE audience, some of the findings. So as I say, overall tech spending is clearly slowing, but it's still healthy. There's a uniform slowdown really across the board in virtually all sectors, with very few exceptions, and I'll highlight some of the companies that are actually quite strong. Telco, large financial services, insurance, that's rippling through to EMEA, which as I've said is over-weighted in banking. The Global 2000 is looking softer. And also the global public and private companies, GPP is what ETR calls it. They say this is one of the best indicators of spending intentions and is a harbinger for future growth or deceleration. So it's the largest public companies and the largest private companies, think Mars, Deloitte, Cargo, Coke Industries, big giant private companies. We're also seeing a number of changes in responses from we're going to increase to more flat-ish. So again, it's not a disaster, it's not falling off the cliff, and there are some clear winners and losers. So adoptions are really reverting back to 2018 levels. As I said, replacements are rising. Digital transformation is moving from test everything to okay, let's go, let's focus now and double down on those technologies that we really think are winners. So this is hitting both legacy companies and the disruptors. One of the other key takeaways out of the ETR survey is that Microsoft is getting very, very aggressive. It's extending and expanding its TAM further into cloud, into collaboration, into application performance management, into security. We saw the surface announcement this past week. Microsoft is embracing Android. Windows is not the future of Microsoft. It's all these other markets that they're going after. They're essentially building out an API platform and focusing in on the user experience and that's paying off because CIOs are clearly more comfortable with Microsoft. Okay, so I'm going to take you through some themes. I'm going to make some specific vendor comments, particularly in cloud software and infrastructure and then we'll wrap. So here's some major themes that really we see going on. Investors still want growth. They're punishing misses on earnings and they're rewarding growth companies. And so you can see on this slide that it's really about growth metrics. So what you're seeing is companies are focused on total revenue, total revenue growth, annual recurring revenue growth, billings growth. Companies that maybe aren't growing so fast like Dell are focused on share gains. Lately, we've seen pullbacks in the software companies and their stock prices really due to higher valuation so there's some caution there. There's actually a somewhat surprising focus given the caution and all the discussion about slowing economy. There's some surprising lack of focus on key performance indicators like cash flow. A few years ago Splunk actually stopped giving, for example, cash flow targets. You don't see as much focus on market capitalization or shareholders returns. You do see that from Oracle. You see that last week from the Dell Financial Analyst meeting, I talked about that. But it's selective. These are the type of metrics that Oracle, Dell, VMware, IBM, HPE, generally, HPE, Inc. as well will focus on. Another theme we see is that global M&A across all industries is back to 2016 levels. It's basically was down 16% in Q3. However, well, and that's, by the way, due to trade wars and other uncertainties and economic slowdowns and Brexit. But tech M&A has actually been pretty robust this year. I mean, take a look at some examples. I'll just name a few. Google would look or big acquisitions. Salesforce, huge acquisition, a $15 billion acquisition of Tableau. It also spent over $1 billion on click software. Facebook with control labs. NVIDIA, $7 billion acquisition of Melanox. VMware just plunked down a couple billion dollars for Carbon Black and its own sort of pivotal within the family. Splunk with a billion dollar plus acquisition of Signal FX. HP over a billion dollars with Cray. Amazon's been active, Uber's been active. Even non-traditional enterprise tech companies like McDonald's trying to automate some of the drive-through technology. Mastercard with Nets. And of course, the stalwart M&A companies, Apple, Intel, Microsoft have been pretty active as well as many others. But generally, I think what's happening is valuations are high and companies are looking for exits. They got some cool tech. So they're putting it out there that, hey, now's the time to buy. They want to get out that maybe IPO's not the best option. Maybe they don't feel like they've got a long-term plan that is going to really maximize shareholder value. So they're putting forth themselves for M&A today. And so that's been pretty robust. And I would expect that's going to continue for a little bit here as there are, again, some good technology companies out there. Okay, now let's get into, Alex, if you pull the next slide of the company outlook. I want to start with Cloud. Cloud, as I say here, continues its steady march. I'm going to focus on the big three, Microsoft, AWS and Google. In the ETR spending surveys, they're all very clearly strong. Microsoft is very strong, as I said, it's expanding its total available market. It's into collaboration now. So it's going after Slack, Box, Dropbox, Atlassian. It's announced application performance management capabilities. So it's kind of going after New Relic there, new SIM and security products. So IBM, Splunk, Elastic are some targets there. Microsoft is one of the companies that's gaining share overall. Let me talk about AWS. Microsoft's growing faster in Cloud than AWS, but AWS is much, much larger. And AWS's growth continues. So it's not as strong as 2018, but it's stronger, in fact, much stronger than its peers overall in the marketplace. AWS appears to be very well positioned according to the ETR surveys in database and AI. It continues to gain momentum there. The only sort of weak spot is the ECS, the container orchestration area, and that looks a little soft, likely due to Kubernetes. And drop down to Google. Now Google, there's some strength in Google's business but it's way behind in terms of market share, as you all know, Microsoft and AWS. It's AI and machine learning gains have stalled relative to Microsoft and AWS, which continue to grow. Google's strength is strong suit has always been analytics. The ETR data shows that it's holding serve there, but there's deceleration in data warehousing and even surprisingly in containers given, it's strength in contributing to the Kubernetes project. But the ETR three year outlook, when they do longer term outlook surveys, shows GCP, Google's cloud platform gaining, but there's really not a lot of evidence in the existing data and the near term data to show that. But the big three cloud players continue to solidify their position, particularly AWS and Microsoft. Now let's turn our attention to enterprise software. I'm just going to name a few. ETRs will have an extensive at their webcast, will have an extensive review of these vendors and I'll pick up on that, but I just want to pick out a few here. Some of the Alex in the next slide, some of the enterprise software winners. Workday continues to be very, very strong, especially in healthcare and pharmaceutical. Salesforce, we're seeing a slight deceleration, but it's pretty steady, very strong in Fortune 100. In Einstein, it's AI offering appears to be gaining. As well, some of the acquisitions, MuleSoft and Tableau are also quite strong. Demandware is another acquisition that's also strong. The other one that's not so strong, the exact target is somewhat weakening. So Salesforce is a little bit mixed, but continues to be pretty steady. Splunk looks strong, despite some anecdotal comments that point to pricing issues, and I know Splunk's been working on tweaking its pricing model, and maybe even some competition. There's no indication in the ETR data yet that Splunk's momentum is attenuating. Security as a category generally is very, very strong and it's lifting all ships. Splunk's analytics business is showing strength, particularly in healthcare and pharmaceuticals, as well as financial services. I like the healthcare and pharmaceuticals exposure because inter-recession healthcare will continue to do pretty well. Financial services in general is down, so there's maybe some exposure there. UiPath, I did a segment on RPA a couple of weeks ago. UiPath continues its rapid share expansion. The latest ETR survey data shows that that momentum is continuing and UiPath is distancing itself in the spending surveys from its broader competition. As well, another company we've been following, and I did a segment on the analytics and enterprise data warehousing sector a couple of weeks ago is Snowflake. Snowflake continues to expand its share. It's slightly slower than its previous highs, which were off the chart. We shared with you its net score. Snowflake and UiPath have some of the highest net scores in the ETR survey data of 80 plus percent. Net score, remember, as you take the, we're adding the platform, we're spending more and you subtract, we're leaving the platform or spending less and that gives you the net score. Snowflake and UiPath are two of the highest. So slightly slower than previous highs, but still very, very strong, especially in larger companies. So that's just some highlights in the software sector. The last sector I want to focus on is enterprise infrastructure. So Alex, if you'd bring that up. I did a segment at the end of Q2, post Q2, looking at earning statements and also some ETR data on the storage spending segment. So I'll start with pure storage. They continue to have elevated spending intentions, especially in that giant public and private, that leading indicator. There are some storage market headwinds. The storage market generally is still absorbing that all-flash injection. I've talked about this before. There's still some competition from cloud. When pure came out with its earnings last quarter, the stock dropped, but then when everybody else announced, you know, negative growth or in Dell's case, Dell's the leader, they were flat, a pure storage bounced back because on a relative basis they're doing very well. The other indication is pure storage, very strong in NetApp accounts. NetApp's mixed, I don't call them out here, but we'll do further analysis down the road of NetApp. So I would expect Pure to continue to gain share and relative to the others in that space, but there are some headwinds overall in the market. VMware, let's talk about VMware. VMware's spending profile, according to ETR, looks like 2018. It's still very strong in Fortune 100, rather, but weaker in Fortune 500 and the GPP, the global public and private companies. That's a bit of a concern because GPP is one of the leading indicators. VMware on cloud, VMware cloud on AWS looks very strong, so that continues, that's a strategic area for them. Pivotal looks weak, carbon black is not pacing with CrowdStrike, so clearly VMware has some work to do with some of its recent acquisitions, it hasn't completed them yet, but just like the AirWatch acquisition, where AirWatch wasn't the leader in that space, it was really, Citrix was the leader, VMware brought that in, cleaned it up, really got focused, so that's what they're going to have to do with carbon black and security, which is going to be a tougher road to hoe, I would say, than end-user computing and Pivotal. So we'll see how that goes. Let's talk about Dell, Dell EMC, Dell Technologies, the client side of the business is holding strong. As I've said many times, server and storage are decelerating, we're seeing market headwinds, people are spending less on server and storage relative to some of the overall initiatives, and so that's got to bounce back at some point. People are going to still need compute, they're still going to need storage, as I say, both are suffering from the cloud overhang. As well, storage, there was such a huge injection of flash, it gave so much headroom in the marketplace that it somewhat tempered storage demand overall. Customers said, hey, I'm good for a while, because I have now a performance headroom, whereas before people would buy spinning disks, they'd buy the over-provision just to get more capacity. So that was kind of a funky value proposition. The other thing is VxRail is not as robust as previous years, and that's something that Dell EMC talks about as one of the market share leaders, but it's showing a little bit of softness, so we'll keep an eye on that. Let's talk about Cisco. Networking spend is below a year ago, the overall networking market has been somewhat decelerating. Security is a bright spot for Cisco. Their security business has grown in double digits for the last couple of quarters. They got work to do in multi-cloud. Some bright spots, Maraki and Duo, are both showing strength. HPE, talk about HPE, it's mixed. Server and storage, markets are soft as I've said, but HPE remains strong in Fortune 500 and that critical GPP leading indicator. You know, Nimble is growing, but maybe not as fast as it used to be, and SimpliVity is really not as strong as last year, so we'd like to see a little bit of an improvement there. On the bright side, Aruba is showing momentum, particularly in Fortune 500. I'll make some comments about IBM, even though it's really, you know, this IBM Enterprise infrastructure, it's really services, software, and yes, some infrastructure, the Red Hat acquisition puts it firmly in infrastructure, but IBM is also mixed. It's bouncing back, IBM Classic, the core IBM is bouncing back in Fortune 100 and Fortune 500, and in that critical GPP indicator. It's showing strength IBM in cloud, and it's also showing strength in services, which is over half of its business, so that's real positive. It's analytics and it's EDW software business are a little bit soft right now, so that's a bit of a concern that we're watching. The other concern we have is Red Hat has been down significantly since the announcement of the merger and acquisition. Now what we don't know is IBM able to inject Red Hat into its large services and outsourcing business, and sort of that might be hidden in some of the spending intention surveys, so we're going to have to look at the income statement and the public statements post earning season to really dig into that, but we'll keep an eye on that. The last comment is Cloudera. Cloudera once was the high flying darling. They are hitting all time lows. They made the acquisition of Hortonworks, which created some consolidation. Our hope was that that would allow them to focus and pick up the CEO left. Cloudera, again, hitting all time lows. In particular, AWS and Snowflake are hurting Cloudera's business. They're particularly strong in Cloudera's shops. Okay, so let me wrap, just give you some final thoughts. So buyers are planning for a slowdown in tech spending. That is clear, but the sky is not falling. Look, we're in the 10th year of a major tech investment cycle, so slowdown in my opinion is healthy. Digital initiatives are really moving into higher gear, and that's causing some replacement on legacy technologies and some focus on bets. So we're not just going to bet on every new emerging technology, we're going to focus on those that we believe are going to drive business value. So we're moving from a try everything mode to a more focused management style, at least for a period of time. We're going to absorb the spend in my view of the last two years and then double down on the winners. So notwithstanding the external factors, the trade wars, Brexit, other geopolitical concerns, I would expect that we're going to have a period of absorption, obviously it's October, so the stock market is always nervous in October. We'll see if we get a Santa Claus rally going into the end of the year, but we'll keep an eye on that. This is Dave Vellante for Cube Insights, powered by ETR. Thank you for watching this Breaking Analysis. We'll see you next time.