 It's The Cube. Here is your host, John Furrier. Hello everyone, I'm John Furrier, co-host of The Cube. We're here on the ground in San Francisco for VMware's big launch, vSphere 6, a ton of stuff going on in the cloud with Bill Fathers, executive vice president of the cloud service business. Great to see you. John, great to see you. Great event. It was amazing, all the executives. I love Pat Gelsinger. One, because we're big fans of him. He's a valley guy, he's a tech guy, knows that the cycle's been through, a zillion cycles as well as yourself. We are living in a new age where there's a lot of stuff that has happened in tech and new stuff that's happening. And a shift and an inflection point happening at the exact same time. Cloud is at the center of the action. So I've got to ask you, VMware, what's new? What's solid? What's the straight and narrow for the cloud business for you guys, hybrid, obviously making cloud one cloud is a message here, but what's the meat on the bone? Of all the changes you outlined, it's hard to say which is the most profound. I think the shift to public cloud delivery is the most transformational and potentially the most disruptive. I think our view of this is the first 5% of workloads that have moved to the public cloud, which is where we think things stand now, were easily the easiest to move to the public cloud. Now within our client base, they want to move the next 10%, which represents about a $50 billion TAM, and helping them get that next 10% of workload moved to the public cloud is kind of what we're focused on. We don't think anybody right now has the perfect solution for that next 10%. So I love the panel up to you, I'm not sure people saw it in the live show yet, Lending Club up there, and that brought up a highlight for the crowd. They compete with the big incumbent banks, because they don't have cost of capital, but their cost structures are lower. What's going on in the cloud? That's going to give new, open up new competition for you guys. You guys are aware that the existing competition like Amazon and others, and what is potentially threats to your business? So if we look at the existing market for public cloud. So 5%, or 6% of workload in the public cloud, which splits almost evenly between SaaS and IaaS. IaaS clearly dominated by one or two players, as you say, but VMware and vSphere based public clouds have about 20, 25% share there. On the SaaS side of the equation, wide open. Nobody, nobody, nobody has made any inroads into dominating being the infrastructure platform for SaaS players. Look at the top 200 SaaS players in the marketplace, 90% of them DIY today. Some of them are vSphere already, so it's all up for grabs. So in that IaaS segment, yep, Amazon have made huge, obviously, headways, but actually overall, it's wide open. And for the next 5% of workload or 10% that moves, I think there are several players who've got strong hands to play, of which we're one of them. But equally, you have to play that hand very effectively. So born in the cloud is a new phenomenon. That's the people who actually use the public cloud. But SaaS does not necessarily mean born in the cloud. It means you're running big iron as well. You can have data centers all over the place. That's what you're referring to as that SaaS. It's a new opportunity, right? That's right. And if we can sort of make the transition from vSphere is seeing as cool virtualization technology to vCloud Air and the entire sort of being viewed as a hybrid platform, then we become more relevant and interesting to those SaaS companies that want to get access to our client base. So if we can somehow convert ourselves into not only a sort of dominant platform, but also something of a channel to market to our client base for ISVs, then that really is interesting. So this is really a platform war game, obviously in the cloud business. Platforms are everything. Tooling has to be there. You get platforms with integrated applications. You guys are saying one cloud, all apps, whatever that thinks is something like that. That's the expression. What does that one cloud mean? Because I challenged Pat to be in words. Well, he got in my grill. He's like, I called the hybrid cloud a halfway house between kind of like end point. But the final destination is ultimately transparency on complete abstraction away from the cloud. Do you see that same thing? Yeah, I think we're saying abstraction from the infrastructure layer so that our client shouldn't care whether it's running on premises or in our public cloud. That's the sort of distinction we're making. But I think you got it right. So I think we're getting the technology building blocks in place. We're getting the client adoption. The next big phase is for us, obviously, ecosystem. And as we pivot, we're here in San Francisco this week for our partner exchange. Obviously, we've had an amazing, rich ecosystem for over a decade. And now it's how fast can we pivot that ecosystem so it supports us as a platform as opposed to just a cool software technology. What are some of the challenges for the ecosystem? What are the top three things that your ecosystem is telling you guys to deliver? Is it transparency, open source, automation, tooling? What are they asking for? I think they're always asking for our view of the disruptive forces and how they should adapt. They very often look for us to ask for guidance. And obviously, many of them are being disrupted in the area that I see most familiarly, it's making this transition to recurring revenue or cloud services business models, which for many who've been stuck on perpetual software or hardware sale model, it's a fundamental re-engineering. The threat of open source and how to monetize that, I think the OpenStack announcement today should hopefully give them a path of monetization of that as well. And it's increasingly clients want services. So our services-based channel is helpful. But the nature of services clients want now to help them navigate this new mobile cloud era, it's kind of different. I've been a very critical OpenStack in the early days. I'm very critical that I've kind of converted over. Then it was some consolidation. Now I'm skeptical. You're integrating them in. It's like a wave of discontentment I have with OpenStack. I mean, some days I love it, but the customers love it because it's an alternative to grow their own, help the Lego blocks do their own thing. But it's a heavy lift. I've heard from customers directly that it said, OpenStack's a heavy lift. I don't know where I need to build an infrastructure platform. And you're seeing that the groove swings come in the swim lanes, whatever you want to call it. What's your take on OpenStack? Is it consolidating? Is it just swim lanes forming? Is it going to be a free for all? Is it going to be one open junkyard for cloud? What are your take on OpenStack? Yeah, so, John, my view is very similar to yours. Of a service provider background, an OpenStack kind of just hasn't worked for service providers full stop. There are actually no scale OpenStack public clouds now that are really going anywhere. The reverse seems to be true within our enterprise accounts. It does seem that adoption is definitely widening. So we're seeing lots of adoption, but they all seem to reach a sort of glass ceiling of the extent to which they can embrace it. Hassles, and just straightforward support. It's just you can't put if, you know, most of our clients are building new systems of engagement. If it's the front end for your SAP system or an e-commerce platform, it can't break, and it breaks because they don't have a support model in place for it. So we think today's announcement will help with that in terms of saying, look, we'll now support the entire stack from front to back. And then let's see how the ecosystem continues to innovate or not. System engagement came up on the panel. I didn't want to get two in the weeds and bow guard the microphone, but I wanted to ask, and I didn't have time, I'll ask you, systems engagement, we love that, because that's the whole new way to do business, cloud, mobile, and social, but systems of record is how people run their business. How do they connect? Yeah, and to our earlier comment around the first 5% of workload in the public cloud, a lot of them are sort of leading edge systems of engagement. Now clients want to move systems of record into the public cloud. That's when the hard stuff comes. That's when how do you maintain compliance with SOX and HIPAA and PCI? And if your database ends up straddling on-premises and off-premises, so it's just gobsmacking amounts of complexity. So if I was a partner, that's where I'd be going. I'd be doing that as fast as possible. How hard is that to do? I mean, put some color around that. I mean, I'm a startup and I'm a computer science major. I can't just walk in the front door and do that. Yeah, or can they? No, I think that's right, and therefore, it tends to be, you know, the sort of worst case scenario if you need to have the sort of resources of a Goldman Sachs or a Morgan Stanley's IT department to be able to solve the problem, but they're probably the bigger companies are under such regulatory constraints that they can't actually deploy it in live production. So I think there's a sort of, if someone can create enabling technologies to enable that to make it simpler, we'll see it go to the mid-market and suddenly it'll be quicker. Certainly that's the VC strategy, bulk up those big heavy lift companies. Final question to end the segment here on the ground at your launch. What is the key disruptive enabler for your cloud business? If you could point to what every industry has an enabler that's the disruption that's going to cause a lot of opportunity. Networking, period. It is pre-integrating our public cloud with our 500,000 clients installed environments and totally solving the networking problem. That in a year's time, that's what we'll be talking about is the power of that virtualized networking. We've always said on theCUBE that the network's the bottleneck. Year after year, it always comes back down there. Bill, thank you for joining us here on the ground. We are on the ground in San Francisco for VMware's big launch here in the month of February. A lot of stuff, vSphere 6, the biggest in their history, their flagship product with Pat Gelsberg on stage. We'll be right back. I'm John Furrier here on the ground. Thanks for watching.