 From Las Vegas, it's theCUBE. Covering VMworld 2018. Brought to you by VMware and its ecosystem partners. Hello everyone, welcome back. This is theCUBE's live coverage here at VMworld 2018 in Las Vegas. I'm John Furrier, your host with Dave Vellante, my co-host, our next guest, CUBE alumni special guest, Pat Gelsinger, CEO of VMware, always comes on every year to share and talk about the keynote, talk about the news, all the great stuff. VMware, great financial performance, great product portfolio, great R&D, pumping on all cylinders, congratulations. Welcome to theCUBE, great to see you. Always great to see you guys, thanks John, thanks Dave. It's fun, this is our ninth year doing VMworld. You've been on as the president of EMC and six years ago CEO of VMware. We've been there, we've been following your journey. We've been on this path together, so it's been good. And we've talked candidly around what was going on with cloud at the time, your vision, getting sorted in. You made some real quick decisive decisions on cloud. Okay, Andy, Jassy comes on stage. You're personally involved with Andy on the Amazon announcement, which is, I think people don't know how big that's going to be, but VMware and Amazon are seriously deep in a partnership. This is a big deal. This feels like a little wind-tell kind of easy synergies across the board. Well, you know, in some ways we'll say number one in public coming together with number one in private, that's a big deal. And yesterday's announcement of RDS on-premise, to me sort of finishes the strategic picture that we were trying to paint, where it really is a hybrid world. Where we're taking workloads and giving people the access to this phenomenal, rapidly growing public cloud. But we're also demonstrating that we can seamlessly connect it to the private cloud and now we're bringing services back from the public cloud onto the private and your own data center. And that's so profound because now customers can say, oh, I like the RDS APIs. I like the RDS management model. I can now put the data wherever I need it for my business purpose. And that hybrid bi-directional highway is something that we're uniquely building with Amazon. And hey, obviously we're working with other cloud providers, but they are our preferred partner and we're pretty thrilled. We were talking about last year what a tailwind that was. The clarity that allowed customers now to say, okay, I get the cloud strategy because it wasn't clear before. And boom, double down. Yeah, just been absolutely great. Customers get it now. And obviously seeing Andy here again this year. You know, a number of customers are sort of dipping their toes in the water. You know, now it's like, okay, I'm ready to go. And we laid out the one and a half year roadmap of availability zones. Everybody's sort of looking at that. You know, I had a couple of customers saying, hey, you know, I would really like that in Q1 rather than Q2. It's like, okay, let's just sign the deal. We'll figure it out. Love cloud, we saw that in June. Public sector. Well, talk about Andy because we got to know Andy over the years as well. Great executive. Both of you guys are great leaders of your teams. Both great managers. But you're kind of both with no nonsense kind of executives. You get stuff done. This block is on the way. You kind of remove them. You do the right thing. Andy's committed. He's committed to this. You're committed. This is into the, you're in it to win it. That kind of loyalty. Plus, he's also customer driven, heavily Amazon. You guys are too. This deal is not just Amazon trying to do hybrid. It's customers. Can you share some inside baseball around the kind of customer demand around cloud on premise with VMware, specifically Amazon, because this is new for Amazon. They've never done this. They've never done this kind of deal. And it really is unique in that way. And because it was unique, we went into it sort of trepidously. How's this going to work? And we committed ourselves. We do quarterly business reviews with Andy and I. Hey, a lot of little action items. They get finished the week before the Andy Patton meeting. There we are every quarter coming together and really building the teamwork down the teams. As well down the organizations into the field and just finding all sorts of, we're super excited about the RDS announcement. But hey, we have a pipeline of projects behind that. But we're reporting that customers want this. Oh, absolutely. This is a customer, not a kind of, you guys really want to take over the cloud. Well, this is a customer driven thing. Amazon don't do anything. I mean, nothing unless they believe there is meaningful customer demand. They are extraordinarily customer focused in that respect. I think there's something that we can all learn from their myopic focus on that aspect. And they're engaging with customers, building things that customers like and the response obviously from the RDS announcement was really quite overwhelming. So we've been asking people all week, I'll ask for your commentary. People, the conventional wisdom on that deal was it was a one way trip to the hotel cloud of Fornia and it's become a boon for the data center. Why the misconceptions? Why are you confident that it continues to be a boon for both companies? Yeah, and hey, we got to go prove it. At the end of the day, we have to go prove it. So, but the analysts were sort of viewing, hey, there's this big sucking sound in the public cloud where everything congregates, 0.1. And three years ago, that was the prevailing wisdom, that that was going to be the case. Now everybody, and like I had the big CIO who basically said, hey, I got 200 apps, I tried to move them to the public cloud, I got two done. I can build new things there, but this moving was really hard until we have the VMC service. So this ability to move things to the cloud and from the cloud, I call the three laws. The laws of physics, the laws of economics and the laws of the land. The laws of physics, hey, if I need 500 millisecond round trip to the cloud and the robotic arm needs a decision in 200 milliseconds, eh, physics, economics. I'm not going to send every surveillance picture of the cat to the cloud, bandwidth still costs, right? And then laws of the land, right? Where people say, governance issues, GDPR, the things. So because of that, we see this hybrid world and particularly as edge and IoT becomes more prominent, we fully expect that there's going to be more of that, not less. And as I showed in my keynote last year, this pendulum of centralization and decentralization has been swinging through the industry for 40 years. And we don't see that stopping. And edge will be a force of more data and compute pushing to the edge. And that's obviously part of our keynote as well. And I wanted to get in and comment about how you talk about bridging technology gaps or segments with that VMWare. But before I want to just point out you're wearing a VMWare tattoo for the folks who see it, Pat is making all those employees have a VMWare tattoo. Yeah, we have the tattoo machine. You know, we're in Vegas, you know. We should order some more cube stickers. So what happens in Vegas stays on your arm. Remember that. You can't take the tattoos up. That's funny and clever. But let's get back to the keynote. You said a couple of things I want to get your reaction to. One, the bridging of technology successfully has been a transformational gift that VMWare has had with good technologists and good engineers. So I want you to talk about that. And also you had a quote around the old adage of the network is the computer. That's old, the new adage is the application is a network, I think is what you said. Yep, precisely. Yeah, what? Talk about this bridging and then why that quote? That was a really good quote I want to expand on that. Yeah, and you clearly, you know, we think about the history of VMWare and it started with this idea of, you know, right, you know, HP, Dell, IBM, et cetera. And all of a sudden that became VMWare with different hardware underneath it. You know, we bridged across those hardware islands. Now, you know, those hardware islands when they started weren't bad, right? You know, extraordinary innovation, but all of a sudden customers want to start using them together. And VMWare bridged that gap. We talked about the device gap and BYOD and, you know, the iPhone, right, showing up. And all of a sudden, you know, IT wasn't ready to manage it, but customers wanted it, right? So we see Windows devices, Macs and iOS and Google and, you know, Chrome's and so on. You know, how do you bridge VMWare's doing that? You know, we saw the, you know, many of the network, right? You know, boy, you know, my protocols are bound. Okay, again, we're bridging across that. And, you know, that's clearly where Anisex is uniquely playing. So this idea of bridging across these elements, right, is deep in our heritage, right? We do it in an ecosystem friendly, you know, hardware independent now, cloud independent way, right? You know, where we're now saying in the cloud health acquisition, you know, we're going to bridge across these worlds and make them easier for our customers to consume them wherever they may be. You know, and these are powerful innovation, right? Capabilities that are emerging, but customers say, oh, you know, where is that workload running? You know, in increasing in the future, I'm going to say, oh, VMWare's running it for me. I'm not actually even, hmm, where did you run that VMWare, right? You know, because we're going to meet their policies. We're going to meet their business needs. And that bridges what? The cloud that lets this current bridge is what the cloud or? Yeah, yeah, absolutely, right? You know, but the cloud will now be my private data centers as well as different public resources as well. You know, the next, I think one of the next big challenges that we have to lean into more aggressively, you know, is the data challenge. Oh, where's my data, right? In a cloud world and in the SaaS world, right? You know, I want to be able to use my data for different purposes. I don't want it necessarily locked in a particular SaaS application. You know, when I'm running, you know, when I built up that S3 bucket, hmm, you know, maybe I want to run some of my private analytics on that. Oh, the laws changed and I now need to bring that back on premise and you know, bridging across those worlds. So it's both an application statement, a networking statement, a data center. So application is a network. I think it's a network, not the network, a network. What do you mean by that? Well, you know, think about, you know, when I gave the example, you know, a heads up display in a construction hat, right? You know, as you're wearing a hard hat there, right? You know, this AR VR application, right? I'm running in my display for my hard hat and I'm a factory worker now, right? And I'm getting cool, new X-ray vision into the machine of what's going on. I'm able to look through walls of what's going on, right? Wow, that's pretty cool. And I'm getting real time safety information of what's going, oh, that's incredible. Now think about the application behind that. You know, I'm accessing 30 year old building plan databases. I'm accessing, you know, systems of record. You know, system designs that are coming from my, you know, equipment suppliers and cool, new containerized AR VR applications. That's my application, right? You know, when I think about it in that environment and what a complex network of different services, legacy applications, modern, new, microservice, data sources, all of those kind of things are brought together into my application. And in that sense, the application is a network of these different services, data sources, et cetera. And we believe in that, you know, bridging across silos isn't important. It is essential to do that. You know, because as you say, security models across that. You know, how does the, you know, when that application isn't performing like I expected to, how do I go even debug it? Right, you know, because now a flag went off and saying, you know, the, you know, the hard hat AR application is not performing well and I have upsets, you know, manufacturing people on the floor, right? Not being able to get real-time data. Oh, I got to go debug that. You know, what's not working right? Right, it's this network that needs to be able to, you know, be analyzed and need metrics across all of those. I need security models, you know, the ability to essentially load balance, right? Across a complex network of services. You know, and that's the world we're headed to and you know, we think we have some pretty good opportunity to help customers get there. So Pat, explain, how technically does the platform of VMware change and evolve to meet those needs? Is it sort of embracing those new services or is it, you know, rewriting at the core? Could you explain that? Yeah, some of both. And, you know, we'll give two examples of that. You know, one is we're embracing the Kubernetes layer. Right. Right, that's what you heard us say. I'm going to make Kubernetes a new dial tone for the VMware layer. I didn't create Kubernetes, right? It's part of this open source community, but I'll tell you what, we are going to help evolve it, standardize it, make it part of that infrastructure so that Kubernetes dial tone, right? You know, and hopefully everybody's old enough to understand what that means, right? You know, boom, it is always there and we're going to make sure it's always there. So I'll say, in some cases, we're embracing new industry innovations and that one happens to be CNCF, the cloud native computing foundation and that community. So we're participating, we're contributing. In other cases, we've got to go rewrite things. You know, NSX, you know, the current version of NSX, you know, is primarily bound to vSphere. And customers have increasingly said, oh, I need to make NSX much bigger than we ever conceived for the first NSX, right? And I needed to work on all of these other environments, including non-vSphere. So thus we did what we called NSXT, which is a fundamental rearchitecture of NSX. You know, there's probably three or four lines of code that we reused, but that's about it. Right, I mean, it's a major architectural redo because now we're saying, hey, I need to scale this essentially across the planet, right? I need it to work in VMware and non-VMware environments. I need it to be native and multiple public clouds and I need to stretch it into the container level. You know, that was a big rearchitecture project that we undertook. So in some cases it'll be both. And like in cloud health, you know, hey, it'll be things that we inorganically go acquire and then figure out how to meld them into, right, the infrastructure that we build and offer. Do you, so as the CEO and a technologist, do you have a very interesting organizational ownership, governance structure? Do you ever feel constrained writing a $11 billion dividend? Do you ever feel constrained in terms of your ability to fund the R&D necessary to do some of those things? No. Yeah, simple answer. Ray O'Farrill said the same thing off camera. I'll ask you on camera. Yeah, and generally, you know, I mean, am I constrained in how much R&D I can do? Well, hey, I got a budget, you know, we build a P&L, we communicate it to the street and every day possible, you know, I'm pushing to grow the business faster so I can shove more dollars into one of two places, more dollars into R&D or more dollars into sales and customer facing, right? You know, and if Robin Matlock is here, you know, I keep giving her the, you know, the table scraps at the end of those things, but you know, build products that are innovative, radical and breakthrough, sell products and support our customers using them. That's the two things where we put together. Hold and rule. And by the way, you made some M&A, you got Cloud Health, which is a good tool. Yeah, yeah. That was a vertical focus in health care. Yep. Well, not just health care. No, right? Cloud Health is a multi-cloud management platform. You know, they've built their, you know, initial focus primarily in cost management of multiple clouds, but you know, we're going to build that platform out for every aspect of, you know, compliance management, performance management, et cetera. So, you know, very- Cloud Play. Boston-based. Yep. Love it. So, final question for you. As you look at NSX, it's becoming kind of that, feels like a TCP IP moment. Okay, we talked to Andy about this, and he was very complimentary of NSX. I asked him what TCP IP did to connecting internet working, creating boom, the OSI model, stop that TCP NIP. That created a lot of opportunities and wealth, and that's where we are today. Is there a disruptive enable as powerful as TCP IP that you see coming? And is that an NSX mindset? What's your vision on this? Because this is what the cloud needs. It needs interoperability. It needs to go to a level to create goodness in the ecosystems, wealth creation for entrepreneurs. This is the new era. Where is that disruptive enabler? Well, you know, I'll say a couple of comments, and you know, one is, hey, if Andy says it, it's right. And you know, you remember, you know, this is the Rembrandt of systems design for the last 30 years. Right, you know, Andy is that profound in his contributions to the industry. So, you know, in terms of technical leadership, you know, visionary leadership, you know, he's very high on my list of, you know, the seminal figures of Silicon Valley. You know, at the systems level, it's just hard to get better than Andy. So, you know, he honored you by coming on theCUBE. He honored us by being here at VMworld this year. He had his complimentary of NSX in its position in the marketplace as a leader. He was very candid about that. You know, and now with NSX, we really are, I think, in this moment where, you know, you're saying, okay, the old model of networking simply doesn't work. It must all be done from a software level. And this isn't just like putting a few APIs on top of my hardware and saying it's now software-based. Right, it is conceiving a globally distributed control plane, right, that allows you to essentially span, right, you know, multiple clouds, multiple data centers, multiple services, you know, anywhere on the planet, totally consumable, right, you know, four services that run on top of it, you know, transforming every aspect of a layer four through seven service, load balancing, firewalling, all of the routing, all of those need to be reconceived in a totally distributed fashion. And underneath it's saying, you know, we support a very, very broad range of different hardware, but, you know, the hardware can never constrain what you do with that SDN lever. So, and that's the core of our virtual cloud network strategy. Obviously, VeloCloud, you know, hot product, SD-WAN, branch transformation, pushing that edge of the network out in a fully cloud-based way, very excited about that capability. We know you're under a lot of time pressure, so we'll let you go. Five seconds, summarize VMworld 2018, what's this about, what's the vibe here in five seconds, go. Five seconds. 15, 20, 30. Oh, here we go. Whatever you need. All right, take 10. So, it is, you know, the seminal moment where the industry is seeing the value of the multi-cloud era, right? And now we're giving them the tools to embrace it, right? And two leaders have on stage, Andy Jassy, CEO of AWS, Pat Gelsinger, CEO of VMware, talking about multi-cloud validation from customers and strong technology teams and business, congratulations. On your success, okay? Hey, thank you. Thank you. Pat Gelsinger, we pay you for the cube sticker. We get royalties on that. Thank you so much. Pat Gelsinger, CEO of VMware here inside the cube, breaking it down. Great, great vibe here at VMworld 20. Stay with us for more after this short break. I'm John Furrier with Dave Vellante. We'll be right back.