 Live from Las Vegas, it's theCUBE. Covering VMworld 2017, brought to you by VMware and it's ecosystem partner. Okay, we're live here at VMworld 2017. It's theCUBE's coverage of VMworld 2017. I'm John Furrier with my host, Dave Vellante and Stu Miniman. We've got two sets kicking off live here in Las Vegas for our eighth year of coverage. Blooming, we're in the broadcast booth at the Mandalay Bay. Guys, we're here to kick off the show, three days of wall-to-wall coverage, three days of great keynotes. Today, big surprise, Andy Jassy, the CEO of Amazon Web Services, joined Pat Gelsinger on stage in a surprise announcement together, hugging each other before they talked and even after they talked, this partnership is going to be big. We're going to have a coverage in-depth analysis that Dave, VMworld is now the cloud show with Reinvent. If you look at what's going on, Stu, you've been to many, many shows, this is our eighth year. This was the show, great community. Now, Reinvent has been called the new VMworld. You put them both together. It's really the only cloud show that matters. Google does not have yet a presence. Microsoft has all these shows that have kind of spread all over the place. All the top people are here in IT and cloud at a VMworld and at Reinvent coming up in December. Well, John, eight years ago, we talked about is this the last stop for IT before cloud just decimates it? And if you go back two years ago, VMware was not in favor. The stock was half of what it is today. License revenue was down 1%. Fast forward to today, it's growing at 10 to 12% a year. License is up 13%. It's throwing off operating cash flow with $3 billion a year. The market's booming. Wall Street's talking about VMware now being an undervalued stock. The big question is, is this a fundamental shift in customer mindsets? In other words, are they saying, hey, we want to bring the cloud operating model to the business and not try to force our business into the cloud? Or is this the last gap of on-prem? Stu, I want to get your thoughts because I wanted to squinting through the announcements and all the hype and all the posturing from the vendors is, I was looking for, where's hybrid in all this? Where's the growth? And my validation point on the keynote was when we heard very few words hybrid. Private on-premise was the focus you guys put out at Wikibon, a report called True Private Cloud, market sizing and kind of layout. That's where the growth is. But I tweeted, private cloud is the gateway drug to hybrid. We're seeing customers now wanting to do hybrid but they got to do their homework first. They got to do the building blocks on-premise and that is what you're calling true private cloud. Do you agree and your thoughts? Yeah, so really good points, John. And the nuance here, because if I'm VMware, I've got a great position in the data center. 500,000 customers, absolutely. The growth is the move from legacy to true private cloud. The challenge for VMware is they already have 500,000 customers there. Those are the customers that are making that shift. So it does not increase vSphere. One of the key things for me is Pat said, what vSphere had done for the last 20 years is what NSX is going to do for the next 10 years or more because they're betting on networking, security, some of these multi-cloud services that they announced. How do those expand VMware so that as true private cloud grows and they also do public cloud, VMware has a bigger seat at the table, not just saying, wait, my customers are shifting, where are they going? Dave, I want to get your thoughts. You and I talk about all the time on camera and also privately about ways. We've been through many waves in the industry. We've seen a lot of waves. Pat Gelsinger has seen many waves too. Let's talk about Pat Gelsinger because interesting little tidbits inside the stage area. One, he said, I want to thank you for being the CEO of this company. Stu, you made a comment that this is the first VMworld where there's not a rumor that Pat's not going to be the CEO. He's kind of kicking ass and taking names right now. Stock's up and he put the wave slide out there. And wave slides to me, you can tell the senior management is kind of mojo by how well laid out the wave slide is. He put up a slide on one side, mainframe mini computer cloud. And the other side, client server internet IoT edge. He nailed it. I think Pat Gelsinger is either going to go down as being one of the most brilliant strokes of genius by looking at either laying down, look like a data center position and some say capitulate to Jassy who's smiling up there saying, bring those customers to Amazon. But this is a real partnership. So, I mean, Pat Gelsinger, go bigger, go home. You can't be any bigger, bold bet than Pat Gelsinger right now with VMware. And it looks like it's paying out. What's your thoughts on Pat Gelsinger, the wave and his bold bet? Well, I think that businesses are configuring the cloud, John, to the realities of the data. And the data, most of the data is on-prem. So the big question I have is, how is Amazon going to respond to this? And Stu, you and Floria have had debates over the years. Floria has said flat out, Amazon is going to do a true private cloud just like Azure Stack. You have said no. But if Amazon doesn't do that, I think that Pat Gelsinger is going to look like a genius. If they do do that, it's going to become increasingly a more competitive relationship right now than it is right now. Yeah, just a little bit of the inside baseball. Kudos to VMware for getting this VMware on AWS out. I hear it was the sprint of the finish because taking cloud foundation, which is kind of a big piece. It's got the vSAN, the NSX, all that stuff and putting it in a virtual private data center. Amazon owns the data center, they give them servers. This was a heavy lift. NSX, some of the pieces are still kind of early, but getting this out the door limited availability, it's one data center, they're going to roll out services, but to Dave's point, right, where does this go down the road? Is this Amazon sticking a straw into 500,000 data centers and saying, come on in. We've got great services and this is awesome because I don't see Amazon rewriting their Linux stuff to be all native VMware. So where will this partnership mature? Andy said we're going to listen to our customers. We're going to do what you're asking us and absolutely today, VMware and Amazon, two of the strongest players in the ecosystem today, they're going to listen to their customers. There's Google, Oracle, IBM, Microsoft, all in the wings fighting for these customers, so it's battle royale. There's no straws in there, John. What's your take and where do the developers fit in this? Well, Stu wrote a good point inside baseball, the key is that success with Amazon was critical. Jassy said basically this is not a Barney deal, which he kind of modernized by saying it's most deals are optical, really hitting at Microsoft on this one in Google. I mean, they're groping for relevance. It's clear that they're way behind. Everyone's trying to follow these guys, but on the heels of V Cloud Air, it was critical that they get this stake in the ground with Amazon. They took a lot of heat for the V Cloud Air, Stu. This had to get done. Now, my take on this is that this, I think it's a genius move. I think Pat Gelsinger is by betting the ranch on Amazon. It will go down in history as being a great move. You'll heard that here in 2017. He's so smart. He wants to be a component of the Amazon takeover, which will happen. It'll be a two cloud game, maybe three, maybe four, we'll see, but maybe two. But the ecosystem partners on this phase one is key. DXT, Deloitte, Accenture, Capgemini, and then you start to see the logos coming in. They have so many logos that they break them down. But more importantly, the white space. DevOps, migration costs, network security, and data protection are all filled in with plenty more room for more players. I think this is where the ecosystem was lagging just a few years ago. You saw the shift in the tide. Now you see an ecosystem going, wow, I get what VMware is doing. I'm doubling down. It's an Amazon web services, VMware world, all the other cloud players, in my opinion, are really fumbling the ball. I can infer from that, do you see this as a balanced partnership, i.e., it's not like one needs more than the other. I mean, clearly Amazon needs VMware to reach those 500,000 customers, and clearly VMware needs a cloud strategy because vCloud Air and many other attempts have failed. Yes, we said that, it has failed, we asked Pat about that. So you see it as a more balanced partnership. Do you see that balance of power shifting over time as that straw gets bigger and bigger and bigger? Well, the walking dead or as the Game of Thrones reference coming on is kind of the great wars happening in cloud. And it really is going to become Amazon versus whoever they can partner with and the rest of the legacy world. I think the wave slide was impressive to me because this is such a shift from just distributed computing now decentralized with blockchain and AI looming as massive disruptions. I think this is only going to get more decentralized. So whoever has tech that's legacy will ultimately be toast. And I think Gelsinger's smart to see that wave and I'm starting to see the movement. It's super early, so no big bets. It's just be directionally correct and ride that wave. Yeah, so one of the things that got me is last year kind of went on the radar that VMware's starting to launch some cloud services and we're very direct today that they said there are seven, basically SaaS offerings. It's security, it's cost management. Now VMware on AWS, a little expensive. We're starting to get the data on how much it is per month or per year or for a three year, but you know, going to have those SaaS offerings. We know VCloud Air failed. Also, Palmaritz had played the Microsoft game. We're going to get this suite of applications. We're going to give you email. We're going to give you social. We're going to give you all these things. They're all gone, kind of cleared the table of all those. Now they've got these SaaS applications. So how will that play? I kind of like Pat very upfront on security and said, as an industry, we have failed you. Dave, you've been looking at this for a long time. It's a board level discussion. It's a do-over for security. Does VMware have the chops to play in this space, Dave? Do you buy them as a valid SaaS provider? Well, two questions there. One is in the security front, that great tech is always going to get beat by bad user behavior. So this is a board level issue. As far as SaaS, to me, it's a business model issue that VMware is migrating its business to a ratable business model, which is smart. I don't see it as SaaS as in applications, but I see it as a monthly fee and better to get ahead of it now while you're hot, then get crushed by Wall Street as you're trying to make that transition, like many other companies have failed to do. Guys, one thing I want to note is that VMware also laid out their strategy. You kind of heard it there, even though that Jassy came on stage. And look at Jassy's not an idiot. He's smart. He knows what's going on. He knows that he has to win VMware over because VMware, he's got to balance it. You got him in the back pocket on one hand and got a great relationship to 5,000 customers. But remember, VMware is also an arms dealer. They got the IT operations locked down with their customers. So they have other clouds they can go to. So the big trend that we didn't hear that's out there kind of hiding in plain sight is multi-cloud. Multi-cloud is ultimately VMware's strategy. He laid out, one, make private cloud easy. You guys reported on that. Two, deep partnerships with major cloud providers. And three, expand the ecosystem. Yeah, John, so I mean, a little bit of, you know, kind of rumors I heard. They were actually looking to make the partnership not with AWS at first. It was going to be Google. And Michael Dell said, we're going to start with a cloud deal. It's going to be Amazon. The right move. Absolutely. That's where it's going to be. But you remember last year we were here, John. You and I, the announcement was with IBM. Now, no offense to SoftLayer, great acquisition. It's doing well, but IBM does not play at the level of an Amazon. They might have the revenue of a Google in cloud, but you know, very different positioning. They were up on stage talking about security today. Great position there with analytics. But we'll see. There's two more days of keynotes. I expect we'll see another cloud provider making some announcements with VMware. And VMware, absolutely. An arms dealer. They put out on the slide all of their service fighters. We've got people like CenturyLink and OVH and Rackspace on theCUBE this week, as well as how they're going to play with the Microsoft Google. You got Michael Dell on tomorrow. I know you're going to talk to him about how Dell fits with Azure Stack and how, you know, the Dell whole family is going to play across all of these. Because at the end of the day, Michael Dell and Pat working for him, they want to keep getting revenue no matter who's the winner out there. Okay, final question as we wrap up the segment. Customers that are watching in here, it's clear to me that we even heard from one on stage saying, well, we're taking baby steps. That wasn't her exact words, but they're going slow to hybrid cloud. All the actions on private, as you guys pointed out in your true private cloud report on wikibond.com, you haven't seen it, go check it out. It's going viral. But this is classic slowness of most enterprise customers. When there's doubt, they slow down. And one of the things that concerns me, Stu, about the cloud guys right now, whether it's AWS, Google and Microsoft, is the market's moving so fast that if these clouds aren't dead, simple, easy to use, the customers aren't going to go to hybrid. They're going to go back to their comfort zone, which is the true private cloud. Going to build that base and it's just got to get easy to manage. It's got to get easier to a multi-cloud. And the bottom line is that Amazon's clearly in the lead. So, Jassy has a window right now to run the table on the enterprise. He's got about 18, 24 months. But Google's putting the pedal to the metal. I mean, they're pedaling as fast as they can. Microsoft's cobbling together their legacy, okay, running as fast as they can. But there's diseconomies of scale, Stu, for them. Your thoughts and reaction. Yeah, so, I always thought enterprise simplicity is actually an oxymoron. It does not exist. This VMware community, one of the things that people loved about it, they were builders. They were like, oh, I get in there and I tweak that. Harvard Business School calls it the IKEA effect. If I help build it just enough, I actually love it a little bit more. VMware's not simple. NSX, hitting about a billion dollars. When you get into it, it is not easy. You know, security and networking are never going to be dirt simple. Amazon, we thought it was real simple. Now, thousands of services, absolutely. We've been at that ecosystem for many years. It gets tougher and tougher the more you get into it. And it's, John, some of the builders there, the developers there, they get in. There's lots of room for this ecosystem to build around that because one of the things we talk, as VMware goes to some of these clouds, where do they get that ecosystem? You mentioned some of the systems integrators, but the rest of the channel, where can they make money? And trying to help because it's not simple. How do they help get opinionated, make those choices, build it all together? There's professional services dollars there. There's ways to help consult with companies. Ecosystem's a key point. Watch the ecosystem and how that's forming around cloud, hybrid cloud, true private cloud, whatever you want to call it. And then again, the technology's maturing. It's all about the people and the process to actually affect so-called cloud, hybrid cloud, bringing the cloud model to the data, not forcing your business into cloud. We got to wrap up here. We also got Lisa Martin and Keith Townsend and John Troyer. We got some community guests as well, John and the community again like we did last year. So that should be great. But I want to put something out there, guys, so we can hit up tomorrow and tease it out. I worry about when you have these fast waves that are coming through and the velocity is phenomenal right now, is that what tends to crumble, Dave, to your ecosystem point are these foundations. When you have these industry consortiums, it's kind of like this political, they kind of, they've got boards and multiple, we've got their fingers in it. That could be the suffering point, in my opinion. And that points directly to Cloud Foundry. Cloud Foundry, OpenStack, some of these consortiums groups are at risk, in my opinion, if it goes too fast due to your point. Kubernetes has got great traction, you got containers, Docker's got a new CEO, Uber's got a new CEO, I mean the world is moving so fast. So rhetorical question, industry consortiums, do they suffer or do they win in this environment? Depends on what they're doing, right? If they're low level technical standards that advance the industry, I think they do win. I think if it's posturing and co-opetition and trying to cut off one vendor at the knees, it loses. Let's do it real quick, consortiums, win or lose in this environment? Yeah, we've seen some that have done quite well and some that have been horrific. So absolutely, if it gets way too political, open source has done some really good things, but the foundations once they get in there, it's challenging and I'd say more times than not, they don't help. Well, we're in theCUBE, we're breaking it down, we're going to be squinting through all the announcements, looking at where the meat on the bone is, where the action is and the relevance and the impact to enterprises in an emerging tech. This is theCUBE, I'm John Furrier with Stu Miniman and Dave Vellante, we're back with more live coverage, day one after this short break.