 from the SiliconANGLE Media Office in Boston, Massachusetts. It's theCUBE. Now, here's your host, Dave Vellante. Hi everybody, welcome to this breaking analysis where we try to provide you some insights on theCUBE. My name is Dave Vellante. I'm here with Jim Cabela, who was up today. And Jim, we were just off of the VMworld 2019 big show, a lot of energy, a lot of announcements. I specifically want to focus on containers and the impact that containers are having on VMware specifically, the broader ecosystem and the industry at large. So first of all, what was your take on VMworld 2019? Well, my take was that VMware is growing fast and they're investing in the future, which is fairly clearly cloud native computing on containers with Kubernetes and all that. But really that's the future. And so what VMware is doing is they're making significant bets that containers will rule the roost in cloud computing and application, the infrastructure is going forward. But in fact, virtual machines, VMs, hypervisors are hotter than ever and that was well established last week by the fact that the core predominant announcement last week was a VMware Tanzu, which is not yet a production solution, but is in a limited preview, which is the new platform for coexistence of containers on vSphere, a container runtime embedded in vSphere so that customers can run containers in a highly isolated VM environment. In other words, VMware is saying to their customers, you don't have to migrate away from VMs until you're good and ready. You can continue to run whatever containers you build on vSphere, but we more than encourage you to continue to run VMs until you're good and ready to migrate if ever. So I want to come back and unpack that a little bit, but does your data, does your analysis, when you're talking to customers and the industry at large, is there any evidence from what you see that containers are hurting VMware's business? I don't get any sense that containers are hurting VMware's business. I get the strong sense that containers, they've just, of course, acquired Pivlar, very additive to the revenue mix at VMware. And VMware, most of their announcements last week were, in fact, are all around Kubernetes and containers and products that are very much for those customers who are going deep down the container road, VMware's got lots of product for them. So it was a setup question. So I have some data on this. Go ahead. Right answer. So I want to show you this. So Alex, if you wouldn't mind bringing up that slide. And we shared this with you last week when we were prepping for VMworld. This is data from Enterprise Technology Research, ETR, and they have a panel of 4,500 end user customers that they go out and do spending surveys with. So what this shows is, this is container customers spending on VMware. So you can see it goes back to early January. Now it's a little deceiving here. Can you see that big spike? But what it shows is that eight, that big spike is the number of shared customers. So you really didn't have many customers back then that were doing both containers in VMware that ETR found. But as the end gets bigger, 186, 248, 257, 361 across those 461 customers, those are the shared customers in the green. And you can see that it's kind of a flat line that means holding very well in the high 30% range, which is their sort of proprietary metric. So there's absolutely no evidence, Jim, that containers thus far anyway are hurting VMware's business, which of course was the narrative. Containers are going to kill VMware, and no evidence of that. But then why would they acquire Pivotal? Are they concerned about the future? What's your opinion? Well, they're concerned about really cross selling their existing customer base who are primarily on vSphere and the Hypervisor, cross selling them on new world of Kubernetes based products for cloud computing and so forth and so on. In other words, it's all about how do they grow their revenue base? VMware's been around for more than 20 years now. They rule the Roost on Hypervisors. Where do they go from here in terms of their product mix? Well, Kubernetes and beyond that, things like serverless would clearly be in the range of the things that they could add on, their customers could add onto their existing deploys. I mean, look at Pivotal. Pivotal has a really strong Kubernetes distribution, which of course VMware co-developed with it. Pivotal also has a strong functions as a service backplane, the Pivotal function service for serverless environments. So this acquisition of Pivotal very much positions VMware to capitalize on those opportunities to sell those products when that market actually develops. But I see some evidence that virtual machines are going like gangbusters in terms of customer deployments. Last week on theCUBE at VMware, Mark Lohmeyer, who's an SVP at VMware for one of their cloud business unit, said that in the last year, for example, customers who are using VMware cloud on AWS, VMware grew the customer base by 400% last year and grew the number of VMs running in VMware cloud on AWS by 900%, which would imply that on average, each customer more than double the number of VMs they're running on that particular cloud service. That means VMs are very much relevant now and probably will be going forward. And why is that? That's a good question. We can debate that. Well, so the naysayers at VMworld in the audience were tweeting that, oh, I thought we started Pivotal, we launched Pivotal so that we didn't have to run VMs or run containers on VMs so we can run them on bare metal. Are people running containers on virtual machines? Well, they are, yes. In fact, there's a broad range of industry initiatives, not just Tanzu at VMware, to do just that, to run containers on VMs. I mean, there is the Kubevert open source project under CNCF, that's been going for a couple of years now. But also Google has GVisor, Intel has the Kada containers initiative. I believe that there are a few others. Oh yeah, AWS with Firecracker last year's reinvent. All of this would imply, strongly indicate that these large cloud and tech vendors wouldn't be investing heavily in the convergence of containers and VMs and hypervisors if there weren't a strong demand from customers for hybrid environments where they're going to run both stacks, as it were, in parallel. Why? Well, one of the strong advantages of VMs is workload isolation at the hardware level, which is something that typically container runtimes don't offer, for example, that workload isolation seems to be one of the strong features that VMware's touting for Tanzu going forward. So VMware's a centerpiece of VMware's strategy is obviously multi-cloud, Kubernetes is a linchpin to enable running applications on different platforms. Will, in your opinion, and of course, VMware is a hardcore enterprise, right? Will VMware do things? Will they be able to attract the developers, number one, and number two, will those developers build on top of VMware's platform or are they going to look to the cloud? That's a very important question. Last week at VMworld, I didn't get a sense that VMware has a strong developer story. So I think that's really an open issue going forward for them. Why would a developer turn to VMware as their core solution provider when they don't offer a strong workbench for building these hybridized VMs slash containers slash serverless applications that seem to be springing up all over? I mean, AWS and Microsoft and Google are much stronger in that area with their respective portfolios. So I guess the obvious answer there is Pivotal, is their answer to the developer laundry. And so let's talk about that. So Pivotal was struggling. I talked last week in my analysis that you saw the IPO price and then it dipped down. It never made it back up. Essentially the price that VMware paid, the public shareholders for Pivotal was about half of its initial IPO price. So, okay, so the stock was struggling. The company didn't have the kind of momentum that I think that it wanted. So VMware picks it up. Can VMware fold in Pivotal and use its go-to-market and it's a large S to really prop up Pivotal and make it a leader? Well, possibly because Cloud Foundry, Pivotal Cloud Foundry could be the linchpin of VMware's emerging developer story if they position it in that and really invest in the product in that regard. So yeah, in other words, this could very much make VMware a go-to vendor for the developers who are building really the new generation of applications that present serverless functional interfaces that all have containers under the cover but also have VMs under the cover providing strong workload isolation in a multi-tenant environment. I mean, that would be the promise. Now, a couple of things. You mentioned Microsoft, of course, Azure in the cloud and Google. The ETR data that I dug into when we wanted to better understand multi-cloud, who's got the multi-cloud momentum? Well, guess who has the most multi-cloud momentum? It's the cloud guys. Now, AWS doesn't specifically say they participate in multi-cloud. Certainly, their marketing suggests that multi-cloud is for somebody else that really they want to have unit cloud. Whereas Google and Azure kind of embracing multi-cloud in Kubernetes specifically. Now, of course, AWS has a Kubernetes offering but I suspect that it's not something that they want to promote hard in the marketplace because it makes it easier for people to get off of AWS. Your thoughts on multi-cloud generally but specifically Kubernetes and containers as it relates to the big cloud providers? Yeah, well, my thoughts on multi-cloud generally is that multi-cloud is the strategy of the second tier cloud vendors, obviously. If they can't dominate the entire space, at least they can't maintain a strong, provide a strong connective tissue for the clouds that actually are deployed in their customers and environment. So in other words, the Cisco's of the world, the VMware's of the world, IBM, you know. In other words, these are not among the top tier of the public cloud players. Hence, where do they go to remain relevant? Well, they provide the connective tissue and they provide the virtualized networking backbones and they provide the AI ops that enables end-to-end automated monitoring and management of the entire mesh, the whole notion of a mesh architecture. It's something that grew up with IBM and Google for lots of reasons, especially due to the fact that they themselves as vendors didn't dominate the public cloud. Well, so I agree with you. The only issue I would take is I think Microsoft is a leader in public cloud but because it has a big on-prem presence, it's in its best interest to push containers and Kubernetes and so forth. But you're right about the others. Cisco doesn't have a public cloud. VMware doesn't have a public cloud. IBM has a public cloud but it's really small market share and so it's in those companies and Google is behind, but it's in those companies' best interest really to promote multi-cloud, try to use it as a bulwark against AWS who's got obviously awesome market momentum. The other thing that's interesting in the ETR data when I poke in there, it seems like there are more people looking at Google. Now, maybe that's because they have such strong strength in data and analytics. Maybe it's because they're looking for a hedge on AWS but the spending data suggests that more and more people are kicking the tires and more than kicking the tires on Google who of course is obviously behind Kubernetes and that container movement and open source, your thoughts. Yeah, well, you know, in many ways you have to think that Google has developed the key pieces of the new stack for application development in the multi-cloud. Clearly, they developed Kubernetes, it's open source and also they developed TensorFlow, open source. It is the predominant AI workbench essentially for the new generation of AI driven applications which is everything. But also, if you look at, Google developed Node.js for web applications and so forth. It's really, Google now is the go-to vendor for the new generation of open source application development and a Chris Lee DevOps in a multi-cloud environment running over Istio meshes and so forth. So I think that's, so look at one of the announcements last week at VMware and NVIDIA. Their announcement of their collaboration, their joint offering to enable AI workloads, training workloads to run in GPUs in an optimal high performance fashion within a distributed VMware cloud and to end. So really, I think VMware recognizes that the new workloads in the multi-cloud are predominantly increasingly AI workloads. And in order to, as the market goes towards that those kinds of workloads, VMware very much recognizes they need to have a strong developer play. And they do with NVIDIA in the sense that very much so because NVIDIA, where the rapid framework and so forth and NVIDIA being the predominant GPU vendor very much is a very strategic partner for VMware as they're going forward as they hope to line up the AI developers. But Google still is the vendor to beat as regards the AI developers of the world in that regard. So we're entering a world we sometimes call the post virtual machine world. John Furrier is kind of tongue in cheek on a play on web 2.0, calls it cloud 2.0 which is a world of multiple clouds. As I've said many times, I'm not sure multi-cloud is necessarily a coherent strategy yet as opposed to sort of a multi-vendor situation, shadow IT, lines of business, et cetera. But Jim, thanks very much for coming on and breaking down the container market and VMworld 2019, it's great to see you. Likewise. All right, thank you for watching everybody. This is Dave Vellante with Jim Capillus. We'll see you next time on theCUBE.