 from the noise, it's theCUBE, covering VMworld 2015. Brought to you by VMware and its ecosystem sponsors. Now your hosts, John Furrier and Dave Vellante. Okay, welcome back everyone. We are live in San Francisco at Moscone North Lobby at VMworld 2015. This is theCUBE, SiliconANGLE's flagship program. We go out to the events and extract the signal from the noise. I'm John Furrier, the founder of SiliconANGLE. I'm John McCose, Dave Vellante, co-founder of wikibond.com research. Our next guest is called Esher Baap, the president and COO, chief operating officer of VM. We're welcome back to theCUBE. Great to see you. John, Dave, thanks for having me. It's always good to spend time with you, every VMworld we sit here and do. It's great to have you. But this year, a little change of plans. You did the opening keynote. So were you nervous? I mean, usually it's Gelsinger, it's the big stage and now you're the top keynote. It's your peeps, come on. I mean, I don't necessarily get that nervous anymore. I mean, if you don't have a little bit of butterflies in your belly, then you're not excited about doing it. So it's more, the nervousness is about getting going and getting out there. I mean, when you first walk out and you see 20,000 sets of people looking at you, you're like, okay, game on, let's get going. I like to set up this year. I like how you set the table up for Pat today's big, great presentation. But you laid out, I'll say, VM Foundation, you got VM Women's thing going on today at four o'clock at the Marriott. You have a lot of product announcements, kind of the blocking and tackling of the success. So share with us some of the highlights because everyone's like, the old school, it was nothing really new here. And the new folks at VMworld are like, refresh, wow, a lot of new stuff here. So, what's the new stuff? Being an old veteran here at VMworld more than 13 years, I think what's just so exciting is how the company continues to innovate time and time again. And we use VMworld as a showcase to be able to do that. Things that stand out for me right now is how, if you look back over time, there's been a whole bunch of different technologies and companies that were going to put VMworld out of business. And you come to VMworld and at first it starts with Connectic, then it's Hyper-V, then it's Zen, then it's KVN, then it was OpenStack, now it's Containers. And just watching VMworld, how we think about the future and make sure we embrace these new technologies that move the market forward is something we're quite proud of. We don't always view all of these things as big competitive threats. We look at them as market extension opportunities for us and they all run on the same platform that we brought to market for the mass many years. So I, you know, and then we have some great events. We have a VM women's conference we do every year at, you know, showing our diversity and we're really focused on that a lot internally at the company. And then there's many events I just left. We have a CIO conference this year that's being hosted by our CIO, Baskire, that's going really well with 40 different CIOs. And we just, you know, keep thinking of different ways to be innovative at this conference time and time again, not only technologically, but how we engage with our people. Yeah, I got to say, this year, that stands out for me as well. And some illustrations for me is one, Pat's keynote today. Really takes a long view of perspective and kind of sets the time as bigger. It's not about short-term results and all this elite capital conversations around the Federation, which is noise to the bigger picture, which he basically just kills that conversation by laying out, here's, look at the future. This is what we're going after. And then you got tactical stuff like DevOps, which is kind of down in the trenches. So that's interesting. So to me, that's the highlight for me this week. So I got to ask you with that going on, you're out leading the teams that actually talk to customers. Yes. So how do you now take the vision that Pat laid out and you get the Federation construct, how do you do in those deals? How's everything working with VMware? Give us some data on what's going on with the sales, the customers, the deployments, the solutions. Yeah, so again, we did lay out a great vision at VMworld again this year. And if you look at how we're addressing the market, we're really now talking to multiple audiences where if you go back five years ago, we talked to a single audience. And as we engage with our customers, we're talking to, if you will, the core VMware virtualization folks, but now we're talking to networking teams, we're talking to security, we're talking to the line of business who is driving IT, and we're also engaging, as you said, John, with the developer community. And one of the things that we've been focused on is not only going after those audiences, but making sure that core IT is become relevant to these next generation type of people that want to leverage their infrastructure. And with our vision, we now can turn over our vision to our core customers and say, you now can internally market yourself as someone who's capable of running your legacy environment and looking at the future as well. And I think that's really playing out here in the show this year. And then the other area is just with NSX. NSX, and we showed the picture of a bullet train with this thing taking off and going extremely fast yesterday at the financial analyst meeting we had. And I can tell you, in just watching you, I just walked through the show floor over there, and you go to the VMware booth in the one section that is jam-packed every time you go there is around NSX. So John, I'd say these customer engagements and conversations have expanded from pure virtualization to the cloud, people to security, and a lot of that is around NSX. And then the one lasting, Dave, is just our end-user computing strategy. I think at the conference last year, we said, what a difference a year makes in end-user computing in 2014. In 2015, I'll say it again, what a difference a year makes. We've come so far. The acquisition of AirWatch has put us on the forefront of everything going on and both not virtualizing existing desktops, but the world of mobility. So our strategy's coming together and I will tell you, you talk to customers at the show, they're seeing it real time. Well, one of the difference five years makes, especially in that business, I mean, it's a win on 180 in that whole end-user computing space. So you're talking about these different opportunities and it ties into the TAM expansion that you guys laid out a couple of years ago, actually, your strategic plan. The reason I like talking to you, Coach, because you're the executive who's most responsible for running the business. I listen to the conference calls when I can or I read the transcripts and, you know, Pat will give the high level, Jonathan will give you the tax rates and then it comes down to, Carl, why don't you take that question, right? Because you know the business. You're the executive who really is responsible for that. And the big theme of these last, you know, several calls has been, you know, years now, a couple of years, diversifying beyond the core of vSphere and you're beginning to do that in a big way, vSAN, NSX, vCloud Air, management. So I want to, if you could talk about that TAM expansion and the business and how you feel about that and the momentum. Yeah, I think one of the statistics we share on the hearing's call every quarter is how our business has evolved over the years and the statistic we always use is what percentage of our business comes outside to stand alone, if you will, naked vSphere sales. And now we're up over 60% of our business, you know, up from I think just three years ago where it was only 30% of our business. So we continue to evolve and make sure we're selling all these products. The exciting part is we have all these solutions, Dave. At the same time, when you're thinking about from a go-to-market perspective, we have to really figure out where to prioritize and how we enable our sales force to be capable of now catching all these great solutions and products we have to take to market. So we've spent a lot of time on evolving and transforming our sales force to be capable of selling multiple solutions into the market. But it goes way beyond, Dave, quite frankly, our sales force. It also goes to our channel. As you know, it just walked that solutions exchange over there. You see, you know, 400 plus, you know, customers, partners and ecosystem folks there, they're all working with us. And we have to make sure that they can move with us as quickly as we want to move as we bring these things to market. So it's not easy. I think we're doing quite well in the evolution of our go-to-market and how we're selling. But it's something we're going to have to keep working on, especially as you go into cloud and you have different licensing models, whether it's a perpetual, a subscription model or a term model, there's a whole bunch of things we have to do different. And I think we're doing it well. And the customers want that choice. But I'm glad you brought up that point because it's a great opportunity for you, especially as your enterprise agreements come up for renewal. Now you can sell other services like bananas and bunches, but it's complicated. And what I'm hearing from you is it's really the ecosystem power that allows you to do that. And as well, some hard work and training and the like. Is that right? Absolutely, Dave. And you know, we do use the enterprise license agreement as a vehicle and how we engage with our customers. And as they come up for renewal, the great news is we have a framework in place. And now we have the opportunity, as we continue to innovate, bring more and more of these products into the renewal and hopefully make them bigger as the years go on. So Carl, Pat said in this keynote soundbite I picked up on referencing clouds. Can we all get along? Kind of like playing with that kind of phrase that everyone kind of throws around. So I want you to comment on that and then I'm going to share a tweet with you. Then I'm going to ask you a sales motion question with how you guys are handling your sales motions with your customers in terms of the value proposition. Someone tweeted, it's no longer the big beating the small, it's the fast beating the slow, get agile with VMware, one cloud. So one cloud, any device or one cloud, any application, any device is the key message. So let's start with the cloud question first. Can't we all get along? I think in some sense we can and we are getting along. In another sense, we're competing. I mean, this is a cooperative world we live in or I call it frenemies. We're friends and enemies simultaneously. It's just a world we live in and IT today. And if you look at it through the lens of VMware, the one thing we've said time and time again is we're going to give our customers freedom, flexibility and choice. I articulated this during my keynote yesterday morning and really it's this whole notion of letting our customers choose who they partner with, how they partner with them and then look to VMware and say, will you still engage? And we're doing that. An example in the cloud space. VMware obviously can run on-premise with our private cloud and we can run our customers' workloads in our VCloud, AirCloud itself or one of our partners. But at the same time, we'll look at our customers and say, you know what? If you want to provision any of your workloads and run them in an Amazon cloud, in the Microsoft Azure cloud or any other cloud out there, we'll be the provisioning layer through what we call CMP, Cloud Management Platform. And that's what's helped us emerge to be the number one cloud management platform player in the industry. So it's not necessarily that we have to directly engage with some of our competitors in the cloud space, but we also look at our customers and say, hey, they have great clouds. We're not going to have one big homogeneous cloud. There's going to be many clouds. There's going to be a heterogeneous set of infrastructure people want to use and we're going to allow them to do that, but we're going to be the orchestrator of how they do it. Just to drill down on that real quick. The word engineering came up in Pat's Cube conversation earlier today, talking about cloud, how cloud can be many things to many people. Cloud is just kind of like distributed computing. It's the outcome of engineering efforts and every customer has a different use case given the workloads. So given that piece there, that is where the resource piece comes up, the unlimited resource. So is that the key driver for your philosophy of many clouds that, hey, let the customers engineer what they want per se? Is that kind of what you're getting at? What we're saying is we know the customers will want to leverage many clouds out there. I mean, whether, and it's not just infrastructure as a service cloud, it's PaaS cloud, platform as a service and it's SaaS, whether it's Salesforce or Box or any of the others, we're saying we know they're going to want to use them. At the same time, we look at our customers and say, listen, we've been on a journey. And we say we've been on a journey for the last 10 years together and there's probably no one who's provided more value or more economic return in the data center than VMware in the last 10 years. It's a rhetorical question and I'll ask customers that and they'll say, yeah, you're probably right. And then I say, it's not if, it's when you're going to use a public cloud and they'll say yes. And then I'll say, well, why don't we go on another decade long journey and make sure that exactly how you run your environment today, we give you a safe passage way to go to the cloud, not if, but when you want to go there with the same operating model, with the same tooling and the same infrastructure. And when you have that conversation with VMware customers, they're like, let's engage and let's go on another journey because I know why you can take me there. And that's where our engineering comes in. Things like long distance vMotion, backing up virtual machines in a public cloud. So the engineering of what we're doing is deeply integrated into our solutions but it doesn't eliminate our customers from using other clouds. So the key there, if I may, is that you're enabling your, you're giving credibility to the IT organizations that are so vital. Those are your peeps, right. It's the shadow IT that those guys are trying to avoid. Obviously that's the edict of the organization that IT is responsible for. So that to me is the key. Yeah. It's a great way to put it. Well, I mean, the thing that's happening now is that what Pat brought up, I want to get your comments on this because this comes back down to your sales touch points. Obviously you have your constituent in IT, right? Ops. So Pat said on the cube here, he said they did a survey in the DevOps, one of the DevOps conference, whether you're a developer or in IT and majority of the people were in IT. So obviously you own, that's your wheelhouse. You have a great install base, 10 year journey, that's cool. You own that. And you call it ops dev. Well, no, but this is IT. IT is the guy who kicked ass with virtualization. So we know that exists out there. But what's happening now that we're seeing here, and I want to see if you guys are seeing it in the field, is there's a whole other pressure point from the app developers that are rolling out massive projects. Are you guys touching that part of the organization, the sales motion? Are you hearing that from customers? And can you share any color on that? I think the question really is, how are we engaging, or what are we doing to engage with probably a different set of customers, and that's the developers. And I would say if you talk to Robin and you talk to the marketing teams, we're just reaching out to those developers. We haven't historically, as you both said, really been talking to developers. We've supplied IT with an infrastructure that then they support the developer community. But what you're seeing now is the developers don't believe IT can give them what they want and they're going around them to other different modes. Any cloud bubble. Which is exactly why now VMware has a two-pronged strategy. We're going to go with what we're going to do is we're going to enable IT to remain the platform of choice for the developers, but we're also going to go and touch the developers and give them the confidence that they can run on the existing IT platform. You're going to eliminate shadow IT. That is the goal. It will always exist, I'm sure, but... Over some things, but it's been... Shadow IT, as I always said on theCUBE, is like, it's been R&D. It's like at some point you've got to operationalize it. Absolutely. And if you think about it, when we speak to customers, what we want them to be is a service broker. We want them to broker infrastructure services, past services, SaaS service, and developer services on the most efficient, effective way they can run it, whether it's internal or external clouds. And we don't want to create a bottleneck because you never want to slow down the speed of innovation from the developer community. But if you can somehow funnel them through IT and they can get the confidence IT can get them the resources they want, then it's a win-win for both of us. Yeah, shadow IT is born out of necessity. If you can eliminate the necessity, then you win. Everybody wins. Exactly, Dave. So final question for me is, what are the top conversations that you're having with customers? In terms of like, look at just from metadata from you on, like what are some of the conversations that are the real down and dirty conversations with the customers? What are they talking about? What's their top concerns? What's the top three conversations? I'd say there's probably three. The first is the challenge they have with running their legacy data center where 70% of IT dollars are spent but also trying to address the needs of the business and the developer community. If you will, supporting both sides of that to divide is actually really hard and they're all struggling with it. You talk to any customer of any size, they're struggling with it. How do you take your brownfield environment and make it capable of handling net new infrastructure platform solutions and applications? And some of them just build brand new greenfield data centers and that's how they go forward. So that's the first thing that we hear loud and clear from our customers. The second is, I don't think any of them believe the technology's not going to evolve and when we bring this whole notion it's a very big vision of software defined data center to our customers, they all get it and I'm confident we can deliver it all the way from network compute to storage and highly automated. That is not their biggest challenge. The single biggest challenge we see with our customers to getting massive scale adoption of the software defined data center is not technology, it's people. Their organizations are aligned. I'm the network team, I'm the compute team, I'm the storage team, I'm the DevOps team and all of a sudden this crazy company VMware comes in and says, we're converging the technologies and now you have a mismatch between your technology and your organization. So that people transformation, that people transformation is actually really hard for them to consume, right? So it's, I'd say that is the single biggest challenge that we see with our customers today. I'll tell you, in our experience the successful organizations are the ones that dam the torpedoes, bring in the technology and then figure it out as opposed to trying to figure out the organization because it'll never happen. Yeah. Just a forcing function. It's a forcing function, exactly. And then the third area of conversation we're having with our customers is around network virtualization. This is not if it's when and how fast. I think we've eliminated the barrier of virtualizing the infrastructure just like we did years ago with ESX. It took a long time for us to break through that barrier but because we broke through that barrier, I think there's a much more openness to something like network virtualization because we've already proved it can be done in one component of the data center compute. Why can't we do it on networking? So that's a big discussion point. Yeah, for the folks watching that last point, if you look at Pat Gelsinger's interview, he talks about where that hardened line is and he sees the evolution. So, Carl, thanks for the insights. I know you're super busy. You got a lot of things to do. You're roaming the halls, going to all the different events. Congratulations and thanks for coming on theCUBE and sharing your insights. Thanks for having me. Appreciate being here every year with you guys. Appreciate you. Thank you. Live from VMworld 2015, this is theCUBE. I'm John Furrier with Dave Vellante, live in San Francisco for VMworld 2015. We'll be right back after this short break.