 Live from Las Vegas, it's theCUBE. Covering Dell Technologies World 2019. Brought to you by Dell Technologies and it's ecosystem partners. Hello everyone, welcome back to theCUBE's live coverage here in Las Vegas for Dell Technologies World. I'm Javier DeValante, we've got Pat Gelsinger back on theCUBE. He stopped by yesterday, did a flyby after his keynote, kicked off our intro session, he's back for the sit down. Welcome back. Can't get enough of you, Pat. I love to photo bomb you guys, so it was great. Anytime, I know you're super busy, business is going great, and what a three years it's been. I remember the keynote you gave at VMworld a few years ago. This was really a time where I would call the seminal moment for you, because you saw our vision and we've talked privately and on theCUBE about, and you gave the speech of, this is going to be the preferred future, and it was very visionary oriented, but it ended up happening. That became the beginning of a run for VMware. And since then you've been kind of chipping away and filling in all the tech pieces, the business model, and deals with Amazon and now Azure and others. How are you feeling about it? What's the highlights? What's your perspective of where we are now and what's the notable accomplishments? Well, you know, it's been just great. And you think about the run that we've been on where, you know, five years ago we described the hybrid future. And, you know, most people said, what are you, stupid, right? And, you know, it's, you know, student body right to the public cloud. And now everybody has started to understand the difficulty of replatforming, right? It says, wow, this is really hard, right? I can spend millions and millions of dollars. In fact, one customer's estimate was that we're going to spend almost a billion dollars replatforming all their applications to the cloud. And when they got them cloud native, what do they have? The same apps. So imagine going to your board and saying, I'm going to spend a billion dollars just so I can be on the cloud, but I'll give you no new business value. You got to be kidding, right? You know, and that's why this hybrid future. And as I like to joke, Andy, five years ago, Andy Jassy, you know, said, if you're running your own data center, you're stupid. And Pat said, if you're using Amazon, you're stupid. And now we're doing bro hugs on stage each other, right? And by the way, hybrid, would you pick that trend that was right? Multicloud, though, came out of more of a reality, less of an operating vision. Because hybrid cloud, you know, you saw the dots after those dots. But I think multicloud was much more of a reality. When people started to realize that as I started doing stuff on premises, wow, I got native workloads in the cloud. And there are benefits for being in the cloud for cloud first, for certain workloads. But then the multicloud thing comes up. Yeah, and I think everybody has started to realize, and I really, as I would say, I think every CIO needs a three cloud strategy. Making their private data centers into a proper operating private cloud, right? And some of this week's announcements, I'm sure we'll get back to those a little bit to me are just huge, and dimension, and VMware cloud, and Dell EMC, a huge accelerant of making your private data center up like a private cloud at scale. Second, you need a primary public cloud partner. I think most people should pick a primary, right? Not one, a primary. And then a secondary cloud as their partners. And then you have your range of SaaS offerings. And I think that needs to be the core of every IT, CIO's strategy for the future. And our objective is to create an environment between what we're doing with VMware cloud foundation and now VMware cloud and dimension. What we're doing with Amazon, our preferred partner for the public cloud offering, what we announced this week with Azure, right? Our 4,000 other cloud partners, including a very successful relationship with IBM, right? And saying, okay, that's your infrastructure. And the bulk of your workloads should run on a VMware environment that we can operate across that with the same tools, the same interfaces, the same security, the same management tools. And then use the other cloud services as they bring you business value. You're a fan of TensorFlow, go for it, baby, right? You know, and use it in your app. You love function as a service with Lambda, go for it. But the bulk of your workloads should land here and use these where they have business value. And to follow up on the three legs of the cloud stool, the CIO's legs. Number three is for what? Is it for risk mitigation, exit strategies, or more specific best of breed, horses for courses type of workloads? Yes, yes, and yes, right? To some degree, it really is saying, nobody wants to say I'm only in one, right? You know, nobody wants locking for it. Also, you know, clearly, hey, you know, these are technologies, they break, you get more resilience that way, right? You know, you want to be able to manage your cost environments. You know, there's clearly this view of, okay, you know, if I can do one, two, and three, I can do N, right? Because most people are also going to end up picking, oh, I'm in Hong Kong. Okay, I need a Hong Kong cloud because my data can only go there. You know, I'm in Malaysia. Oh, they require all data to be there. Because in practicality, if you're a big enterprise company, it's not just going to be three, you're going to need to be four, five, and six as well for regional. And then you're going to inquire somebody, they're using a different partner. It really says, build an operational environment that works that way. Give myself business flexibility. I have application flexibility at that way. And if I've done that, I really can move to the other environments that my business requires. I think one of the reasons why you guys have been so successful, if I go back five or six years, I remember you laying out the market, the market segmentation. You're obviously close to customers. You're a very clear thinker. You've obviously looked at the market for multi-cloud. How do you describe that? How do you look at the TAM? How big is it? Well, if you think about cloud today, we're closing in on 100 billion of the public cloud. You add SaaS to it. You got almost another 100 billion at that level. And the overall data center market is probably in the order of a trillion-ish dollars. Give or take. Yeah, on that order. And then you throw the operations cost inside of it. You're probably looking at something that's in the order of two trillion dollars as well. So this is a big market. Part of the excitement that people are seeing in this cloud environment is they can just go faster. And as I described in the keynote today, we want to enable every one of our customers to stop looking down and look up. Spend less time looking down at the infrastructure. We're going to operationalize it. We're going to automate it for you. We're going to take care of it so that every one of your engineers can become software engineers building app and business value. I want to ask you on that point, because one of the things I was talking last night, the analysts briefing or the reception was having a debate with one of the strategists in Dell. And I'm like, look it, outcomes are great at the top of the stack. Looking up, you want outcomes. But during the OSI stack days, no one cared about outcomes. It was either token ring or ethernet, speed one. So certain things have to be speed driven, world class, and keep getting better. And so that's what we're seeing as an infrastructure requirement. Horizontal scalability, operational scale. So that's a speeds and feeds game. So the outcome there is faster and simpler. Up the stack, data becomes a big part of that. That more as we see outcome. Do you see it that way, Pat? Because again, your infrastructure, it's often in the tele-set-down stage. We want to have a whole new, paved new infrastructure for this next generation, which is essentially a refresh of infrastructure. Okay, well what does it look like? It's got to be fast. It's got to be flexible, software defined. Your thoughts? So clearly, what we're trying to do is we build this common infrastructure layer. It's built an environment that allows you to be fast, but also allows you to be in control and cost-effective. Because if you would say, oh, I just want to be fast, that doesn't work, right? We still have limited budgets, and people at some day there's a CFO day of reckoning. But you also have to realize, and part of the hybrid cloud laws that I described this morning, one of those is the laws of physics. Hey, my factory automation for robotics needs to be 40 milliseconds, period, right? And if I round-trip to the cloud at 150 milliseconds, guess what? Right, you know, my image recognition for being able to detect my autonomous vehicle is less than 50 milliseconds. I can't round-trip to the cloud together. It has to be fast, but we also need to be able to push more of this data, more of the inference of my machine learning and AI closer to the edge. And that's why you heard Michael talk about and Jeff talk about this explosion of data. Most of that data will be at the edge. Why? Because every camera, every sensor will be developing it, and I'm not going to round-trip it to the cloud because of economics, right? I can't afford to take all that data to the cloud. It's not just the latency. It doesn't matter, latency matters. Yeah, and so for that, so I can't take it to the cloud. I got to be able to compute locally. I got to be able to apply the inference of my AI models locally, but I also then need the scale aspects of cloud as well. And my third law, of course, was regulation, right? Where, guess what? I was just with a major customer in Latin America and they said they are repatriating 100% of their data and applications out of the public cloud because the new president is assisting on data only in his country for all of their nationalized resources and assets. That's driving the change. So this brings up the multi-cloud kind of thing earlier. If you got to be in all the, you guys got to play in all the ponds out there and in the industry. But let's talk about onstage here at Dell Technologies World. You were onstage with Michael Dell and Satya Nutella and I was looking up there and I'm like, man, the generational knowledge of the three people onstage, the history. I think it just ends up getting old. Well, I mean, we've seen it all. I mean, from Intel to EMC to VMware, Dave's a historian of tech as he self-proclaimed. I'm up there, I was pretty blown away. You guys are leading the industry. What kind of moment was that for you? Because now you've got Microsoft doing the deal with VMware and who would have thought that? I would have. Yeah, well, maybe two different aspects to it. One is, I've known Satya for over 25 years. He was sort of going through the Microsoft ranks and Windows, NT, SQL, et cetera. And I, at the same time I was. So we got to know each other, almost 25 years since our first interactions. When Michael Dell first came to Intel to meet Andy Grove to get microprocessors so we could start his business, I was there. Right, so I mean, these relationships are decades old. So in that view, it's sort of like, hey, Satya, how's the life? Hey, Michael, how's Susan doing? It really is. But you haven't even gone anywhere. You're still in the industry. Yeah, but then to be able, the announcement was really pretty special in the sense that I call it 20 years in the making. You know, not a year or two, 20 years in the making. Because VMware and Microsoft has essentially been at odds with each other for two decades. Right, you know, at that level. And to be able to be on stage and saying, that's right, we're cooperating on cloud, we're cooperating on client, and we're cooperating on futures. Okay, that's a pretty big statement as well. And I think customers respond very positively to that. And, you know, I'm, you know. It's been a bold move, and you also made a bold move with the cloud too, Pat. I got to say, that was another good call. Partner with Andy Jassy. Again, once, you know, both idiots, I guess calling each other cloud, you know. Hey, public cloud at odds, partner. Yeah, and you know, and I really think this idea of moving tail, you know, headwinds to tailwinds. And you know, the Amazon partnership with Andy, you know, and as we say, it's our preferred cloud partner, VMware cloud on AWS of VMware offered service. You know, super committed to it. You know, we're closing in on 2,000 customers on that now. Clarify the Amazon relationship. I saw some press articles that kind of miss a skewed a little bit. They kind of made it sound like the Azure deal was similar to the Amazon deals. Just explain the difference between the VMware deal with AWS and Andy Jassy, that relationship, and the other cloud ones. Take a minute to explain that. Yeah, thank you. You know, what we're doing with Amazon is VMware is offering a cloud service that I operate for customers that runs on Amazon, right? You know, and that is a VMware delivered service. They're our preferred partner, right? We're not bashful about that. That if we have the choice, that's the one to go to. It's going to be best. But what we've done now with Azure is we've made the VMware cloud foundation, the same underlying components available with cloud simple and virtual stream, you know, their partners, right? To have a VMware cloud foundation offering delivered by Microsoft as a first party service. So VMware cloud VMware is delivering it, you know, in the Azure for VMware services that's being delivered and supported by Microsoft. That's the same deal you did with IBM. It's very, you know, the same, right? Yeah, the same as we've done with our 4,000 other cloud partners, right? And obviously, virtual stream and cloud simple are part of that 4,000 and they're making the VMware cloud foundation available to Azure customers now. And what's the benefits to VMware customers for those deals? Well, imagine that you're somebody and Walmart was quoted in the press release as an example. Walmart's a big VMware customer. Walmart is also a big Azure customer, right? So their ability to say, oh, I can have a hybrid environment makes a lot of sense for that kind of customer. So we really do see it as saying, you know- Customer driven basically. Absolutely. And you know, people said, well, which are you going to sell to us? Well, in most cases, customers have already decided, you know, who their major cloud partners are. And we're saying the VMware offering, even as we're first and best with Amazon, right? You know, we're saying, you know, as they make their cloud choices, we'll have a valid VMware cloud foundation offering available. And best, I want to understand best. Best is in part anyway, because of the engineering you guys have done. When we interviewed Andy Jassy in November at Reinvent, he said, you can't have a lot of these types of partnerships and it's very deep integration. Is that why it's best and what makes it best? Yeah, I call it first and best for two reasons. One is because we are engineering, we are co-engineering, you know, the bits first get done of VMware cloud and then we make them available to the other partners. You know, that's where we're doing the core engineering, the innovation. You know, Andy has hundreds of engineers working on this. I have hundreds of engineers working on it. So it's first and best from an engineering sense. And given it's my service and my offering, we're selling it aggressively in the marketplace, positioning it as part of the broader set of solutions and leveraging that like you saw this week with the Dell EMC offering, VMware cloud and Dell EMC. It's leveraging all that first and best work, you know, to now bring it on premise as well. So it really is both the engineering as well as the go-to market. I got to ask some CEO questions. So, Tom Sweet has said that they're happy to have the class V transaction behind them. I'm sure you're glad too. Thank you. That was very generous of you. You've been incredibly good at acquisitions. I mean, obviously NICERA, HEPTO, Cloud Health, AirWatch. Bellow cloud. Bellow cloud, I mean, most acquisitions, frankly, don't live up to their objectives. I think that's not the case for VMware. So now you're, good news is you draw off a lot of cash. So you're building up that pod again. How do you see going forward the use of that cash, R&D, M&A, maybe you could make some comments there to the extent that you can. Yeah, and you know, we said the primary ways we use cash, stock buybacks and M&A. And that continues. We did the special one-time dividend which helped they'll go public. Everybody's happy. The markets responded super positively on both the Dell side. You know, they're up, what, 40% since they're go public, VMware, you know, up almost 50% this year. I mean, it's just tremendous. Right? Tremendous, $80 billion value now. Yeah, just tremendous. And right then we said going forward, where it's business as usual for us. We're going to continue to do stock buybacks. We're going to continue to do M&A's. You know, as you said, you know, we're good at this acquisition stuff, you know. And, you know, part of that is, as I call it, you know, imagine you're a hot startup company. Right? And you say, do I want to be part of VMware? Right? And we try to answer these questions. Do we have vision alignment? Right? Yeah. Right? Can we accelerate your vision? Because most startups, you know, I mean, they talk about, you know, unicorns and so on like that. Well, what really motivates them is their vision. And if they believe their vision is going to be accelerated as part of VMware, you know, so they are on this and we're going to turn them to that. Oh man, they get excited. Do we have a cultural fit? I mean, with every CEO, right, of our, you know, acquisitions and, you know, HR does, we really, you know, are they going to fit our team? Because, you know, cultural issues, you can't butt your heads day and night. And certainly VMware, you guys are, that culture is very hard, hardcore. We're hard play hard. Yeah. And, you know, it has to be, you know, this deep drive for technical innovation, right? You know, the technical due diligence that we do with our startups, you know, right? It's sort of like, you know, this is like a PhD exam for these, you know, I mean, they really got to do this stuff. Some people don't fit in the culture of VMware. And we've said no to a number, right, of potential acquisitions over cultural issues as well, that they're just not going to fit. Hey, we're not going to be perfect, but the fact that we can bring these companies in, accelerate their vision, give them a culture that they're excited about. You know, we have maybe 90-ish percent success rate. The industry average is below 50 percent. Yeah, it's a fantastic track record, I mean. Right, and that just gives us the ability to do organic and inorganic innovation, which to me is like a, you know, a potent recipe. And you got the radio conference coming up, all your talk kept people in the queue, we'll be there. Pat, you've created great shareholder value. You've got, you've turned those headwinds into tailwinds, and we were watching the whole time. It's been great to watch, and what's next? You have your VMware tattoo still on from VMworld? You have a Dell tattoo? You know, I'll tell you a little inside story. My wife, you know, after the VMworld keynote with the tattoo on, we were leaving on vacation two weeks later, and all she said to me after the keynote was, what's that tattoo thing it better be gone by the time we leave for vacation? It's like, it was no, honey, that was a great keynote today. It's like, that better be gone. Nothing's better than watching that video on that cube sticker we had on your hand too. Pat, great to see you as always. Great commentary, great analysis. Congratulations on all the success with VMware. Again, the transformation just is getting started. We're seeing a lot more good things for you guys as well. Yeah, and you know, this has been a great week in some ways. I mean, you know, I sort of joked this morning on stage that, you know, it almost felt like VMworld, right? We talked about VMware technologies and that Dell partnership accelerating it so well. It's not the AMC world, it's Dell world now. It's the whole new vibe. And you know, with that, you know, I just really believe and you know, the superpowers that I talk about, we're just getting started. So we're going to be doing this a long time together. What's on your plate in front of you now? You've got VMworld coming up in a few months. Priorities, objectives, what's on your plate? Well, you know, I have to leave some of the secrets for what we're cooking up for VMworld this year. You know, but some of these steps clearly in the developer container space, super important, you know, for us to really make some progress there. Obviously we'll have some incremental cloud announcements as well. You know, it's great. You know, where it rhymes with VMware. Yes, it's very good. We have an advertisement on that coming out. So, you know, a new ad. But you know, it really is, I think, you know, that topic area is one that, you know, how can we really solve that for customers that really can deploy at scale? You know, containerized environments for an enterprise workload. So excited about that area. And you know, maybe just a few deliverables from what we announced this week. All right, take your CEO of VMware hat off, put your cube analyst hat on. What's the most important story here at Dell Technologies World? If you were a commentator, you can't say VMware because it's biased, but you got to be objective. You can say VMware if you're an objective. What's the most important storyline here as a backdrop for Dell Technology? What's the real net net to customers? Well, you know, I think, you know, and I'll say, you know, as exciting as the Microsoft announcements were, I think the most important thing was VMware Cloud on Dell EMC, on-prem. Because to me, you know, the fact, you know, I go to CAOs, right? And I've done this probably five times since the keynote finished on Monday. And I say, how many of you have fully updated your hardware, your firmware, your operating systems, your networking stack, right? Your compute stack, right? Your management on the latest releases, all of them patched, upgraded appropriately for your environment. And they say, their eyes roll. The answer is none, you know, not some, none, right? You know, I have customers that are asking me to extend support for vSphere 4.5, right? You know, it's like, what, you know, that's been e-weld for a year and a half. What are you talking about, right? You know, I mean, you know, but the reality is, is that, you know, most people go to the cloud, right, public cloud, not because it's more cost-effective or because it's better, it's because it's easier, right? So what we've really said is we can make easy in the private cloud and truly deliver that hybrid cloud experience. And I think as customers really experience the TCO benefits, the acceleration, the reductions in their operational environments, the personnel associated with it, the security benefits of being always patched, upgraded, the most released. You know, now you're talking about attacking that other trillion dollars of operational costs that they're bearing in their personnel and so on. You know, to me, that is like so powerful if we really get that engine going. So in it. And the simplicity that comes out of that. Yeah, you know, and so much, you know, and again, the demo that we showed, you know, that was the VMware cloud on AWS being able to demonstrate now a complete picture into the on-premise environment. That's powerful. Pat Gelsinger, CEO of VMware. I know he's got to go. Thanks for your generous time. I know you're really busy. Again, Pat Gelsinger. Love you guys, thank you. We love you too. Pat Gelsinger, CEO of VMware, creating a lot of shareholder values, got a lot of tailwinds at their back. VMworld's coming out to the Cube. Of course, we'll be there with two sets. As usual, the Cube cannons, two sets here. Firing cannon balls of content here at Dell Technology World. I'm John Furrier, Dave Vellante. Stay with us for more after this short break.