 Live from Cube headquarters in Palo Alto, California. It's the Silicon Valley Friday Show with John Furrier. Hello everyone, welcome to the Silicon Valley Friday Show. I'm John Furrier, live in Palo Alto, California. This is where we talk about all the technology every Friday, eight o'clock. And I'm John Furrier, and I have Jeff Frick here kicking me off. We got great guests lined up. We got Dave Vellante, co-CEO with me with Silicon Eagle Media in town this week, visiting the West Coast, getting ready for our big plan for the Cube season. And also we have a great guest, exclusive new CEO of Marketo, the chief executive officer on for two months in the job, Steve Lucas, formerly of SAP, tech veteran, going back to business objects, Microsoft in the 80s and 90s. Jeff, great show, obviously a lot going on again. A lot going on. Big news today, California, Northern California, no more drought. I heard that on the drive coming in. So all this rain has done its job. The drought is over, but yet Bloomberg had a story yesterday that Silicon Valley needs drain-o because the pipes are clogged. I hope they're washed out after this rain. Two days ago the story came out. So I mean, look, this is the big story right now. The big story is obviously the Trump inauguration, which is Trump all the time, his press conference, by the way. He was incoherent as usual. And a great strategy too. If you think about it, why not distract the Senate hearings from the secretary that they're gonna try to get it? This is the master of distraction. He is so unconventional that I think anyone trying to predict the output of what happens when he does what he happens is gonna be really hard to do because his supporters will say, hey, it's fine, we're in the same position. How do you deal with trolls? It's very simple, you ignore them. So what if we all just ignored Trump? It did a shutdown, no media coverage. Like nothing, let him tweet by himself and just nothing happens. And then they even get focused on the real issues, the Senate hearings, right? Not worrying about what he said or what he didn't reference. Again, this is what's going on. Again, Silicon Valley with Trump looks like a boom could be coming down the pike with the, we talked about this last show and the repatriation of cash. And so our guests are gonna talk about that today. We asked Dave Vellante to come on and talk specifically about some new research coming out of Wikibon around market share around the clouds. That's gonna be really telling. And then Steve Lucas, again, the CEO of Marketo will come on. Talk about predictive analytics and M&A going on in the Valley. And the Drano article from Bloomberg where it says Silicon Valley needs Drano referring to the exits aren't happening but yet their investments are being put into the pipe and the investments aren't coming out so they're clogged. So the thought is what is the Drano gonna be? Not a lot of IPOs. We see consolidation and M&A coming down the pike. So what will that be? We don't know. But Jeff, I mean, I gotta talk about what happened last week because it's interesting dynamic was we had a show last week with Alan Cohen and then he came on, we had a great conversation. And then just this week, the New York Times in the Opt-Ed Thomas Friedman quoting our show, thanks Thomas Friedman at the New York Times for bringing the content from our show into your Opt-Ed, adding some color to it and quoting Alan Cohen from Chief Commercial Office at Lumio with a link to Silicon Angle. So great, great job, great job. Look, a little coverage. People are watching. Thanks for watching New York Times and feel free to cover all day long. Jeff, what's your thoughts on what's happening right now? We're in the new studio and tech industry. What's your thoughts? Well, you know, top of mind, John, is I just got back from the North American International Audio Show which I had to learn to say a lot of times. And it was amazing to me. We cover a lot of big events. There's 10,000 credentialed media people for two days before the show even opens. And the entire talk of the show was not zero to 60, was not headroom, was not the latest V8 motors but it was all about mobility, connected devices, autonomous vehicles. So this wave of cognitive computing, we talked to the Watson people that are now partnering with GM which is interesting, you know, OnStar has been around for 20 years. It's coming down the pike really, really fast and much faster than people give a credit. So to me, that was an amazing event, A to B in such a large scale event but two, you know, the things we talk about here in Silicon Valley, Nvidia was there. You know, they basically pulled out the autonomous car chip. John, it's littler than your laptop that runs these things. I mean, this stuff is coming, it's here. Yeah, and also there's a new group within the government forum just for this department to look at autonomous vehicles. We saw that this week. That's really interesting now. There's like, you have the Department of Transportation, now you have a Department of Transportation that has Department of this and a Department of that because it's AI, it's software, it's policy, it's transportation, it's physical infrastructure. I mean, you know, we were talking yesterday with David Floyer. I mean, if you think about the IOT, how are cars going to get the data? And this is going to be a big issue. We will have to build construction in the United States to accommodate autonomous vehicles. You're already seeing fleets kind of getting it first but the big debate is we don't, I don't think autonomous vehicles are going to happen in the U.S. faster than they will happen in other countries. Yeah, campuses and buses might get automated but for the most part, the United States is not ready for autonomous vehicles. Well, what's driving at the big mega trend that we don't talk about that much but the big, the other big mega trend is this move towards urbanization. There was a statement made at the show that like 80% of the world's population will live in 35 cities in the future. So it's really about urbanization and then efficiency within that urban space for things like roads, streets, parkings. So I think it's the concentration of urbanization is where it's going to happen first. I disagree with you. I think San Francisco will be a beachhead for it just because all the tech companies are here and it's there and they want to do it there but it's really about urbanization and efficiency and I think, you know, all you have to do is drive around the roads at two in the morning and see that there's a lot of wasted infrastructure that's not used efficiently. Well, do you think that infrastructure can be refreshed in the United States? Sure. Faster than other places. I mean, I don't. Faster than other places. I mean, you look at like China, right? They just make a rule and they just put in the new freeway. They put in the new dam. We're not China. The United States. Everything's slower. But that's my point. Here's the question for you. By 2025, will we not own vehicles? Or will it be so expensive to own a vehicle because you're the one that is going to be driving and everyone else is going to be autonomous vehicles? I mean, think about it. Elderly can drive. It's going to extend the life of drivers because now grandma who's going to potentially go off the road can drive with autonomous vehicles. They're going to buy cars. So who are we buying? Why would they buy a car? The car just comes in and gets them when they need to go down and get their hair done. By 2025, will we have autonomous vehicles pervasive where there's not many drivers at all? 2025. That's the question. Yes or no? There will be many, yeah, there will be. There's still be drivers, but there won't be car owners and they won't drive most of their trips. Most of their trips will be handled other ways. And then when you want to take a drive down the coast to Carmel, then you'll take the car. But if you want to get to work, no. If you want to go to the grocery store, no. I mean, they have the one car down there, John, and the whole new way of thinking about autonomy. You don't take the car to the grocery store, park and walk in. It drops you off at the front of the grocery store and goes and parks itself. And then when you're ready with your groceries, it comes back to pick you up. So it's a completely different way to think about the access to transportation. This was the debate that we had with Peter Burris, David Florian myself and Dave Vellante yesterday. By 2025, will there be essentially pervasive autonomous vehicles in the United States? I'd say no. Yeah, I do. But that's me. Again, I think it's urban. I mean, look, the internet's 25 years old. I mean, come on. How many people in New York own a car that live in New York? I think the subway. Exactly. So that's where it's gonna happen. And the infrastructure's set up for that though. It's got streets. It's the same thing. All right. In theory. 25 years, come back and we'll see. Take the taxi driver out of the taxi and you have what's gonna happen. No, believe me, I'm not against autonomous vehicles. No, but I mean, that's what it is. I'm a skeptic on this one. Imagine all those yellow taxis with no person in the front seat. I'm a skeptic on this one. Other news going on, Facebook, on Facebook and around the web. Chamath, who's the former Facebook executive who was an early employee, actually came in a few years when they came to Silicon Valley with me and their growth, now runs Social Plus Capital, big time venture capitalist, basically was announced, just sold all of his Facebook stock. Everything. He's a billionaire, practically. I don't think he's a billionaire, but he's pretty close. He's got a lot of dough. Sold it all and put it on two companies, Amazon and Alphabet, which is Google. He's basically saying, I don't think Facebook's gonna make it as big as Amazon and Google, aka Alphabet. Well, you know what I always say, never bet against Bezos. I mean, the guy's so transformative, he looks so far down the road that I think that's a good bet. On the Facebook play, you got kids different ages. My youngest kid never goes on Facebook and she's not that young. She's a junior in high school. She doesn't do Facebook. She does Snapchat. So it's a big company, is it gonna die? I don't know. But if you look at what are the kids doing? What are the trends? I just don't see how Snapchat monetizes outside that little stupid ad that they throw into the story. Well, I think the bigger issue is when the next kids come along and the next Snapchat comes, to me it's kind of like the popular restaurant, you know, the popular club. They got to own the data. As soon as it gets too popular. Facebook showed the playbook. If the kids go to the next place. We're gonna have Steve Lucas come on and he's from Marketo. Whoever owns the data wins the game. Other news is I mentioned the op-dead piece. Got interesting feedback on my Facebook page when I put out a question because I get asked this all the time when I was thinking about my kids and your kids and all of our families out there that have young kids when stats are showing that like 60% of the jobs coming in the future aren't even existed yet and this whole WikiLeaks thing got me thinking there's a lot of young kids who are totally into geeking out that aren't computer science majors that would love to get in and fight our digital war for us. And they're all gamers. They're all playing Call of Duty. They're all playing CSGO. They're all doing gaming. So, you know, I asked the question, what, how does someone who's a self-taught techie because you can do that these days on YouTube get trained up to be a ninja on cybersecurity? The thread was off the charts, Jeff. And someone wrote, it's called college. I'm like, someone's like, that's not college. They don't teach that in college. College is broken. They don't teach that in college. College is paid. And then there's a little war on, a little debate on that piece. You know, Syracuse University and there's some programs out there for cyber, but basically it's a self-taught thing. And what people said was, go work for Splunk. Go work for FireEye or do some interning somewhere and just get into it. And there's some online ways to be a hacker. So, this is a whole new culture. We've been teasing that on the show and this is what Thomas Friedman talked about in The New York Times, which is society needs to look at the contracts that we have going forward. And I think that's super interesting. And he did pick up on our theme, really interesting. Well, and I think the education system, especially the higher education system needs the changes. The scary quote that somebody came back from 200 years ago, from 1850 or 100 years ago and landed and looked around. Everything we do is different. The way we get around, the way we work, the way we communicate, except for, schools look just the same. In fact, it's the same buildings and maybe a couple of the same old teachers. So, I think the education has got to change. They're not teaching computer science. They're not, I mean, it's so hard for them to stay on the cutting edge. Sure, there's programs and individuals. We see a lot of stuff coming out of Berkeley and Stanford, but the fundamental way that you get out of high school and you spend four more years and then you're done. This is the money quote from his article. We talk about this. He goes, we've reached a tipping point. He's mentioned, Vladimir Putin, Jeff Bezos, Donald Trump, Mark Zuckerberg. Macy's is shutting down their department stores because they want to go online. Limited is shutting all of their stores. And they got to go online. 200. Amazon will eat their lunch. So they got, as Marketo CEO would say, if you don't get digital, you get out of business. But here's the point that Friedman wrote. It was a moment when we realized that a critical mass of our lives and work had shifted away from the terrestrial world to a realm known as cyberspace, an old term. That is to say, a critical mass of our interactions have moved into a realm where we are all connected but no one's in charge, right? So, I mean, talk about your time. Who makes the road decisions on the cars? So we are living in a world that I did an interview last year, a member at, I think it was DockerCon and the woman from Santa Clara University. She was like, you know, we are dealing with political and social issues that no one's ever seen before. Absolutely. We'll go to just a regular restaurant and look around the tables. And half the people, if not more, are looking at their phones in the physical space and the physical space that is all about social interaction and they're all looking at their phones. So, you know, the telephone has become the remote control to your world. And I think that's kind of where we are. And it's a, it demands a lot of attention, right? It goes back to kind of rat lab. You know, you want that reinforcement. Somebody wrote a great article about the endorphins that are released when a post that you do gets liked. So you get the same kind of desire for craft. Come on, like my first John Furrier. That Furrier on Twitter, like something. Come on. Watch him. I remember in college, you know, I did rat lab. I got to say that when Thomas Freeman wrote about our show and basically took our narrative and pulled it up to the main stream to surface the dialogue, that got me pretty much doped up a bit on that dopamine because, you know, I mean, look it, this is what good press does. And this is an example of not fake news. We go in and have these conversations on theCUBE and we surface them up there for conversation. I don't really care what the link to Silicon Angle that matters. What matters is that our dialogue with the guests on our show get to be surfaced up to a freedman, Thomas Friedman, who's super smart and he mainstreams it for it. And that's the difference between, I think, where news is gonna go with communities. And I think that's a great example with The New York Times on how the media landscape is evolving rather than trying to own it. So, Jeff, great stuff. Yeah. Silicon Valley Fires only in its seventh episode. We're getting our groove swing. Guests come on, CEOs. We have a CEO of Marketo coming on, Steve Lucas on our next segment. So, stay tuned for that. And we have Dave Vellante wrap up the show and give us the scoop on the cloud and the cloud market share. We'll be right back after this short break. Hi, I'm John Furrier, the co-founder of Silicon Angle Media and co-host of theCUBE. I've been in the tech business since I was 19, first programming on mini computers in a large enterprise and then worked at IBM and ULA Packard, total of nine years in the enterprise. Friest jobs from programming, training, consulting, and ultimately as an executive salesperson. And then started my first company in 1997 and moved to Silicon Valley in 1999. I've been here ever since. I've always loved technology and I love covering emerging technology. I was trained as a software developer and love business. I love the impact of software and technology to business. To me, creating technology that starts a company and creates value in jobs is probably one of the most rewarding things I've ever been involved in. And I bring that energy to theCUBE because theCUBE is where all the ideas are and where the experts are, where the people are. And I think what's most exciting about theCUBE is that we get to talk to people who are making things happen. Entrepreneurs, CEO of companies, venture capitalists, people who are really on a day-in and day-out basis building great companies. In the technology business, it's just not a lot of real-time live TV coverage and theCUBE is a non-linear TV operation. We do everything that the TV guys on cable don't do. We do longer interviews. We ask tougher questions. We ask sometimes some light questions. We talk about the person and what they feel about. It's not prompted and scripted. It's a conversation. It's authentic. And for shows that have theCUBE cover it, it makes the show buzz. It creates excitement. More importantly, it creates great content, great digital assets that can be shared instantaneously to the world. Over 31 million people have viewed theCUBE and that is the result of great content, great conversations. And I'm so proud to be part of theCUBE with great team. Hi, I'm John Furrier. Thanks for watching theCUBE. For more information, click here. From CUBE headquarters in Palo Alto, California, it's the Silicon Valley Friday Show with John Furrier. Hey, we're back. Thanks for our next segment here in Silicon Valley Friday Show. I'm John Furrier. Steve Lucas in the studio for the segment on technology, predictive analytics, the election and just in general, the overall consolidation in the marketing technology space and the opportunities. Steve, thanks for joining us here at the Silicon Valley Friday Show. So obviously, Trump was elected in one of the things that Paul Martino founder of Bullpen Capital pointed out and he's a Princeton guy, a predictive analytics guy. He's a geek and now he's an investor. We were riffing on, Nate's still getting it wrong and you wrote a blog post kind of saying that the predictive side of the election kind of missed the boat but all the data was there. And then this is a challenge for marketers as well. Which thoughts on that? I mean, predictive marketing is here but no one's using it. Obviously the election was called by Nate Silver wrong. Hillary missed the boat. She could have seen the Trump movement coming and Trump trolled everybody with Twitter. So who's using marketing analytics and predictive right? Yeah, well, it's interesting. I mean, my big thing is I just amazed that we live in this era of AI where all these predictive models are so great but if they're so good then how did they get it so wrong? I mean fundamentally, Nate Silver gave Trump less than a 30% chance of winning. This was like a day before the election or a couple of days. And to me it's just this fundamental notion of, number one, there was clearly bad data being pumped into those models. But number two, we still have a lot of work to do when it comes to predicting things. I mean, I think we're good at, if you like Diet Coke, we'll predict that you like this snack along with it. No problem, but the reality is humans can still behave unpredictably. Steve Lucas, the CEO of Marketo, one of the leading, if not the leading marketing, predictive automation engines, very cloud-like, very sass-like leader in this new cloud movement. Your thoughts on this whole data-driven world. I mean, marketing used to be, hey, we're going to market some stuff and sell some stuff to customers. It's now taking a leadership role from a tech perspective and it's now part of this big cloud movement. Do you see growth in this market in terms of obviously, it's a no-brainer, everything's going digital, but who's going to win and who's going to lose? Is there consolidation? Some are saying the market's going to be shrinking. We saw VC investments are down this quarter from last. So some people, there's a little price shifting. Will there be more M&A, more consolidation? What's your thoughts? Oh, yeah, unequivocally. I mean, I think when you see this repatriation of cash coming back under a Trump presidency, you're going to see some significant growth in M&A. You know, there's going to be consolidation in the space. I think, I certainly hope Marketo acts as a consolidator as well in marketing. And the reality is the marketer today is being asked by the CEO to help drive digital transformation number one, but number two is digital engagement with this just unbelievable explosion in the number of touch points that consumers have. And so the marketer is kind of under the spotlight, so to speak, and right at the center of digital transformation. You know, I mean, I believe there's going to be massive consolidation. I think there's going to be a lot of winners coming out of the woodwork, but losers too. And I had Alan Cohen on last week and we talked about the stairway to heaven, the Silicon Valley formula. You're pumping a lot of cash and hope that you get to altitude before you blow up. And you can be one of those bomb throwers. There's some startups out there. I won't name names, but they are basically doing the same playbook and they fake it till they make it, but some are actually doing the work. What's your take on the startup scene? Because in this market, everything's exposed. You guys are now a public company, so you have to get down and dirty with tech. You can't fake it anymore. Your thoughts on this startup scene and who's out there? Well, it's interesting. I mean, we've been through this full life cycle of fast growth startup, public company now taking private, which has been a fascinating experience by Vista Equity. But I look at these point solutions. We've talked about this a little bit before the segment, but to me, I'm just fascinated by every new touch or digital kind of touch point that pops up, spawns a new point system. And we're seeing point systems all over the place. It's just ridiculous. And so to me, there's got to be a balance because there's no physical way that in Take Martech, for example, that you can have a product that is a specialized system to analyze how people view data on their watches or their Fitbits or whatever. That to me doesn't have scale. Yet we see cash being pumped into those types of technologies. They're going to be the first to go. They're going to be the first to go. Bloomberg wrote an article under their column called Gadfly, but Dasheera Ovid wrote, Silicon Valley needs startup drain-o. Implying that the pipes are clogged. So I sent her a note on Twitter. I'm like, I think you might've got it wrong. I mean, it's just a different, it's a bigger pipe. I think it's stuck at the end, right? So they can stuff a lot of stuff at the top, but not a lot of stuff's coming out. Her point is there's not a lot of outcomes. And you guys gone private. Michael Dell went private. And when I talked with Michael Dell, he said candidly, I didn't want to have the 30-day shot clock. I mean, that's a quarterly shot clock on earnings and everything. So the 90-day shot clock was killing them to innovate. So you're with private equities coming in, you see a lot more private equity deals, a lot more big M&A deals. And if this repatriation comes back from Europe, that Trump's proposed and that potentially Cisco could have 60 billion in cash. Unbelievable. I mean, they're going to buy somebody, right? So I mean. They'll spend some of that money. What's your thoughts? What's your view of the landscape? I mean, the rich get richer or will there be some startup action? So there's definitely going to be some startup action. I mean, there's a number of companies that are starting to reach that kind of critical mass breakaway speed. But the reality is, and so I will say this, five years ago, I predicted that there would never be another billion-dollar software company. I was sort of right and sort of wrong, because as you start to get to that critical mass level, one of the big strategics was 60 billion in cash in their pocket. They just come in and snap you up. So it was a little right, little wrong, because the reality is we are seeing those billion-dollar companies, but it's the Ubers, the Airbnbs, those kinds of technologies. I know you're very savvy on cloud computing. I want to get your thoughts, because this is kind of like turning into a winner-take-most game of clouds. It's not a winner-take-all. Amazon certainly running the table on the public cloud, but the hybrid cloud is being hugely growing as well. So you've got Microsoft, Amazon. You've got Google, Oracle out there, really, and SAP, and others, and IBM, all kind of competing for the cloud game. Thoughts on landscape position? Who's out there now that you're not working for SAP? Your thoughts on prospects and the horses on the track? Amazon is winning. Let's just call it spade-to-spade. Yeah, we know. They're not the Charlie Sheen of tech, but they are winning. I mean, they are absolutely winning. Tiger blood, Amazon, go. Exactly right. They are winning unequivocally. I mean, I will say this. I think Microsoft is giving it a heck of a run. And Azure is actually pretty friggin' impressive technology. And then you've got the other bigs. I mean, the strategic, SAP, Oracle, they're in the game. They are in the game. But they're much more, they're in the game at the SaaS kind of application tier level. Amazon's kind of just, they just run the gambit. And there's, the thing that Amazon owns, they own the heart and mind of the developer. They do. How do you pry that out of their hands? I don't know. Google's trying. You know, Microsoft is doing a pretty good job. They've got a good developer phone. Google's arrogance could kill them. I mean, I think, to me, I think Google really needs to step up their game and flex their muscle. Because they have a lot of geeks there. A lot of friends who work there. I know Larry and Sergey, those guys, when they first started, again, been following them. I knew everything about it. What's going on with Alphabet. But they got a lot of bets. But can they bring their mojo to the marketplace? There always kind of been the Google Plex inside the Google Plex. Can they partner? Can they bring that out? That to me, their arrogance could kill them. It's a good arrogance from a technology perspective. But they got certainly the competition from Amazon. Well, so here's the fundamental difference between a Microsoft and a Google. So Google, they're not focused. Now, what they're doing with Google Cloud, what Diane Greene's doing, really interesting. But they're not focused. Look at what Satya did with Microsoft. He took the aperture from this to this. Then they get success with Azure. And they get app leverage. They start driving Dynamics. Get Linux now on .NET. That's the cancer. Steve Ballmer called the cancer. Who would have called that? Who would have called that? Microsoft's got some technology. We hear some Scuttlebutt there. But they made the investment. They did the open source move. They do heavily involve the open compute. They've donated so much intellectual property to the Open Compute Foundation. In conjunction with Facebook, you've seen some interesting stuff in the data center. They want people to be more open. So I've got to give Microsoft a lot of props. Absolutely. That's why their stock went from 25 to 60, basically in the past couple years. That's right. So I think that's a good move. Thoughts on Microsoft on the SaaS side. Because now, we're seeing numbers that are going to be out on Wikibon soon. That Microsoft is actually killing it on SaaS, doing very well on SaaS. Because they satisfy a lot of their office. But also growing their infrastructure as a service. Significantly. They are. So here's the thing. Just a couple of years ago, pre-Azure, Microsoft, take even CRM. That is a simple example. They're getting pounded by Salesforce.com. You look at it now. We're actually, so us being a very close tie-in to a CRM system, it was two or three years ago. It was salesforce.com, period. That was it. Take a look at it now. Microsoft is there, they are absolutely winning. I mean, Salesforce, when Mark Benioff's got to, you know, swing in the big stick right now. I saw him at the White House for the Obama farewell. He's also been bid for LinkedIn and Twitter. I mean, that would have been a nice run. Now he's kind of squawking. Maybe in antitrust, I mean, what's your thoughts on all this? I mean, come on, antitrust. Benioff, come on, please. Well, there's big and Mark knows how to play big. And then there's Microsoft. And, you know, Microsoft big, totally different game. You're not gonna win a bidding war, you know, on LinkedIn. And I will say this, that LinkedIn thing, that's gonna change the game. Yeah, I mean, I think, well, they might, I mean, now that Microsoft owns LinkedIn, I speculate there's an opportunity for a new LinkedIn because one of the appeals of LinkedIn was, it was a start, it was a social network. If it becomes a directory service and they lose the edge of making it a real personal environment, I see that as a major risk factor for Microsoft. It's become Skype, right? We don't want it to become Skype. Not that Skype was compared to LinkedIn, but Skype was a huge. Everyone used Skype. You go back and think about Skype five years ago, six years ago, everybody used Skype. No one uses Skype anymore. Yeah, yeah, that's so true. No offense Microsoft. Yeah, yeah, I love stuff. They'd still do, but you know, not us. I think it, so it changes the game. I do think there's a vacuum out there. The one thing I'll probably push back on a little bit though is, I think we're probably five years away from the next LinkedIn, maybe six before we really see somebody come up and play. All right, we'll be right back with our next topic here in the Silicon Valley Friday show. Again, going deep, look at the impact of technology in Silicon Valley and startups. Steve Lucas, who's the CEO, chief executive of Marketo, one of the biggest SaaS companies that came out of the cloud marketing era. Yeah, thanks for joining us on the show. We'll be right back with more after the short break. My name is Dave Vellante and I'm a long time industry analyst. I was at IDC for a number of years and ran the company's largest and most profitable business. I focused on a lot of areas, infrastructure, software, organizations, the CIO community. Cut my teeth there and then had a CIO consultancy that I started and also a software company and then met my business partner, John Furrier, in 2010 and we started what eventually became Silicon Angle Media. The biggest area of expertise is I've been around a long time. When you're as old as I am, you've seen a lot of transitions. Everybody talks about industry cycles and waves. I've seen many, many waves. Met a lot of industry executives and have a little bit of an industry historian. I think the other thing I'd say is somebody once said to me that I know a little bit about a lot of things. So when you interview many thousands of people, probably 5,000 or 6,000 people as I have over the last half of a decade, you get to experience a lot of knowledge or you get to interact with a lot of people's knowledge and you begin to develop patterns and so that's sort of what I bring is an ability to catalyze a conversation and share that knowledge with others in the community. theCUBE is really unique in that a lot of organizations will have vendor TV or sort of talking head TV and in those situations it's sort of planned and there's a next question and theCUBE is a comfortable place. We come inside theCUBE and we have a conversation. Almost as if it were a chance meeting and we have a discussion about a particular topic. Our philosophy is everybody's expert at something. Everybody's passionate about something and has real deep knowledge about that something. Well we want to focus in on that area and extract that knowledge and share it with our communities. In terms of what people get from having theCUBE at their event, well first of all it gives them greater value. So you have this event, you're spending all this money and you bring theCUBE and it extracts more value. It creates more content. People today want content and they want that content to reach new audiences and that's the great thing about theCUBE. theCUBE has a large and growing audience and it has multiple channels. Folks who have never heard of it before come in theCUBE and say, well this is really cool what you guys are doing. It's unique, it adds value to the community and it adds value by really sharing information. I can't tell you how many people stop me at conferences or on the streets, on our airport, say, hey I love your show. People that I've never met before, they say to me, I know you, you don't know me. I watch theCUBE, I queue up your videos, I listen to them while I'm on the treadmill. It helps me learn, expands my knowledge, thank you. So it's really an honor to be part of that community. This is Dave Vellante, thanks for watching theCUBE and for more information just click here. You're listening to the Silicon Valley Friday Show with John Furrier. Back here, Silicon Valley Friday Show with John Furrier. That's me, Silicon Valley in Palo Alto, California every Friday at 8 a.m. We just heard a great segment from Steve Lucas, the CEO, the new CEO of Marketo, public company gone private, again, part of the big landscape, former president at SAP and prior to that, Jeff Frick and I, bantering about a lot of everything from the auto show to what's going on in tech, Amazon, all the stuff going on, but this segment I really wanted to bring in a special guest to talk to us and you about kind of what's going on in probably one of the most hottest contested areas on the planet in technology and this is going to change the game on enterprise. It's also going to change the game on all this new stuff going on, whether it's drones, the future of the White House, future of the world, and that's the emerging technology landscape around cloud computing. Dave Vellante, co-host of theCUBE, co-CEO with me for SiliconANGLE Media, specifically because Dave, you guys have some research coming out of the Wikibon team that Peter Burrs is heading up and David Floyer has been cranking on, which is going to be some new seminal research, again, you guys are breaking the ground, but really market share and revenue for projections around cloud. Yeah, well, John, first of all, thanks for having me on your show. I think it's the first. I've been on your show from the phone before, Mollie, but it's good to be here in your new studio. So, Matt, thank you. Yeah, great to have you in Silicon Valley. So, yeah. Don't move back, stay. And it was fun seeing Steve Lucas on. I mean, Marketo's hot company, a couple hundred million dollars. You know, he's now going to take it to the next level. You know, billion and a half dollar valuations. He called out 538 missing the numbers, no predictive, but interesting comments about M&A, and he thinks Google got some work to do in cloud. You heard that comment. You also heard him saying Amazon is winning. He likes Google, but he doesn't think that they have the chops relative to Amazon. That's really a testament, because he's, again, he built Hannah to the cloud from scratch. Right. I think he went from zero to like billions in revenue, so the guy's got some serious credibility right there. So, let's get down on the data. What are you seeing? I mean, so Amazon's winning, we know that, but I mean, does Google have a chance? Microsoft's looking very good off the tee. First of all, you know, as well as I do, from doing all these CUBE interviews the last five or six years. Five years ago, IT practitioners thought cloud was a buzzword, they would roll their eyes when you talk about cloud. That sentiment has totally flipped. 90% of the world out there is like doing something with cloud. The market this year, so you're right, the Wikibon team is just finishing up its forecast for 2016, $134 billion cloud market. Pretty big, you know, growing, they forecast out to $2022, $520 billion. So, I mean, this thing is really starting to consume, you know, the world. Now, you're talking about Amazon and Microsoft, obviously the two top players. Last year, I think Microsoft eked out a lead over Amazon because Amazon doesn't have SaaS. Microsoft does. So, this year, actually, we think that Amazon, when they report very shortly here, is going to actually be larger than Microsoft. So, we've got Amazon coming in AWS at about $12 billion this year, just ahead of Microsoft, 10 to 11 billion. Those two combined are about, you know, 15, 16, 17% of the total market. We see both of those guys growing. So, to your point about Google, you know, Google's got its data play in the cloud, you know, but it just doesn't seem as relevant as Microsoft and Amazon. Now, the interesting thing about Amazon is we're talking about the total cloud market. If you just narrow it down to what Amazon really competes in, which is infrastructure as a service, they've got about a third of the market. So, they really are a dominant player. So, what's the big finance? So, what's the impact of all this? Let's get it down to the brass tacks here. Bottom line for the folks in IT and around the world, who's winning? I mean, you make it sound like Microsoft's kind of close to Amazon. I don't even see them even close. I see Google way behind. I mean, so, like, I don't, like. Yeah, so the reason why Microsoft is close is because they get all the SaaS, all this collaborative software, all the Office 365, all their productivity software, that's all in there. When you're just looking at infrastructures as a service, again, Amazon is a dominant player. Having said that, you know, overseas, you talk to practitioners, they look at cloud players as an extension of the NSA, you know, so there's a lot of other opportunity. I mean, these guys come behind. Like what? Well, because they're concerned about, you know, privacy and, you know, these companies giving data to the U.S. government. Who cares? They care. I mean, guys overseas can't. So you're saying outside the U.S. There's whole wiki leaks and this whole thing going on. People are saying, I don't want U.S. companies. Yeah, well, look, certainly Western Europe, Eastern Europe, Asia Pacific, and unquestionably China, China trying to be self-sufficient with its own cloud, they don't trust Amazon, Microsoft, and Google. Do you blame them? This brings up the whole point that the New York Times wrote just the other day Thomas Friedman quoting a lot of our material and bringing our show up and mainstreaming our concept and he brings it up. There's no rules. So the question is, this is going to be a socialization model of each domicile country having their own cloud and who powers that? Well, this is a, again, this is another, you know, more content for Friedman and everyone else out there. Get your arms around this. This is really a mind-blowing shift, radical globalization, political geopolitical thing. So I'll give you my take on that. Well, everybody talks about Amazon and Google and Microsoft. There's still a whole huge world out there. Cloud is services and services by their nature have always been fragmented. So I think the vast majority of business that gets transacted in the cloud is going to be outside of Amazon, Google, and Microsoft. Now having said that, they will be the largest players. And so there's no question in my mind, you're going to have the China cloud. You know, probably a couple of China clouds. The China syndrome is a movie, I think. And a lot of fragmentation around Europe and AP. So in Japan, given the political landscape, this could be a disaster. So let me go back to something that Alan Cohen said last week. In the old days in technology, IBM, 40 years ago, you didn't say I want to get a network attached to it. So I think this is, give me the system. I mean, all bundled, all bundled in, they didn't really, they bought a solution. That's kind of what's happening with Amazon right now, as Alan pointed out. So if that's the case, that might change the entire landscape of the computer industry. That means that, you know, I need to buy a solution. Now we're going to get into sub-cloud. So if you believe that's going to happen, which I do. Yeah, it's happening. I think that's right. Andy Jassy told me, when I met with him prior to Amazon re-invent, we had a one-on-one, as you know, a one-on-fourth, posted on a fourth. But something that he said I didn't write about in Forbes and on SiliconANGLE was, he said, we don't look at the cloud as infrastructure as a service, platform as a service, and software as a service. I, as, pass, and sass, and the acronyms. Which is how people look at cloud and they are. Who's winning? Well, they're winning. If you look at infrastructure as a service, which is the hardware and the platform, and if it's an Oracle, it's a software as a service. Everybody wants to cut their own little space. All the old analysts that are all, you know, firms that are dying, like IDG, just got sold to China, as you know. They would look at it and try to slice and dice and garden, would have a magic quadrant for this and that. That's all going away. Okay, so the question is, does that reflect in any of your numbers? So is this all going away? Well, so first of all, I don't think IDG's sold to China quite yet, but that's the rumor. So the thing is, we're seeing a technology. I thought they sold. No, they haven't sold yet. Okay, so they're sideways until they sell, basically. Yeah, and so it's going to be interesting to see what that, if they do sell, what's the next IDG board meeting going to look like? Hey, those Lenovo numbers look pretty low. We might want to put a new article out on that. IDG loses. One telco failure is what is that so. I mean, IDG's under IDC in particular will have a huge credibility issue when it comes to this China thing. I'm telling you. Well, we'll see what happens there. So to your point, there's a tectonic shift going on in the business. We saw it when IBM, everything used to be vertically integrated, and then we saw the ascendancy of Cisco, who had the best routers in Intel, who had the best microprocessors in Oracle, had the best database. Competition occurred on those individual lines, and that's changing. There's platforms of service going away. That's changing it, which is Allen's premise, essentially. Well, I saw the data, so I'm cheating a little bit, but I will tell you that I saw one slide that David Floyd has showed me, and he showed me that the platform as a service is shrinking. I asked Revenue's going down, which means that the SaaS business is going up. Well, IAAS isn't going down. It's just growing more slowly, but I think I have always looked at it as PaaS is infrastructure as a service plus, which is what Amazon's doing, or SaaS minus, which is kind of what Salesforce is doing, right? And of course, you've got Oracle in the middle, obviously pushing its PaaS, because it's got the database and all the tools around it. But I think what's happening is you're very clearly seeing a reconciliation. Now, is it back to total vertical integration? No, but you're seeing the cloud guys bring forth packages of services, and it is more of a shift toward vertical integration. It's part of the reason why EMC is no longer EMC as an independent company. They've been blended in, right? All right, so what's going on in the East Coast? Obviously, you're out here in Silicon Valley. You're running the Malboro office in Boston area where our presence is. I haven't been back since the election. I'm gonna go back and do the Patriots game. Hopefully make it to the AFC championship, but I know you've got tickets to... Well, if Houston wins, you're going, right? Yeah, yeah, absolutely. I mean, sorry, if Houston wins, you're not going, well, ah! Okay, yeah. If Houston's beat Houston, you're going to the game, right? I could make some money. Imagine if Houston wins, that would be a major buzz kill. Houston might win because they got shut out and humiliated in Gillette Stadium the beginning of the season. With the backup quarterback. The double back, the third quarterback. So that would be a buzz kill if that happens. Patriots better win, goddammit. So, okay, what's going on? I haven't been back since the election. What's the vibe on Trump? Are there Trump fans out there? I mean, out here. It's all blue. There's definitely pockets of Trump fans, but a vast majority of the people on the East Coast are still freaking out about the election. There's no question about it. Is there a freak out there? Yeah, yeah. I mean, there's a lot of people that are bummed out, depressed, you know. You know, a lot of protests. My son's at GW, so he's interesting. He's going to be going to the inauguration, checking that out. And yeah, but I think, look it, there is a big sentiment of just get over it. I mean, there's a hardcore. New England people are pretty pragmatic. I mean, I'm sure they'll be like, hey, you know, come on, get a thick skin, move on. You know, next four years. Well, plus it's not just Massachusetts. I'd say the hardcore Massachusetts liberals are pretty bummed out about it. You know, it is what it is, right? And so, but you know, the bigger issue really is to me, what does this all mean for tech, right? We talked about, you and I were talking yesterday about the cash that's overseas. Yeah, it isn't going to be a tax holiday for that cash or is it going to be a permanent holiday for that cash? That could be a huge boost for the tech industry. It's actually, you know, pretty exciting in the short term. I mean, what Doug Gore-Lay pointed out on the podcast, on our show two weeks ago was there are a lot of companies that aren't positioned for the cloud. I'll actually point out some of the ones we know. Obviously, HPE Enterprise got out of the cloud business. Dell and EMC don't, it doesn't have a cloud. Cisco, what are they going to do in the cloud? Well, they just got out of their cloud business too. They just got out of the cloud business too. So you have these people that are big titans in the industry that might, would love a product line refresh, but they can't organically build the products fast enough. So to me, their checkbook will be wide open, picking up startups left and right. So if I was a startup right now, what I would be doing is figuring out where the white spaces of the product maps at Cisco and these Intel, and I would basically run like the wind and create products that would enable them to get into some sort of cloud, big data, IoT world. If they do that, you're going to make a shitload of money. Well, but here's the thing, if you're not in the cloud and you're not in software, you're an arms dealer. And if you're an arms dealer, you're competing with China. Long term. That's the deal. And so, Michael Dell is comfortable with that. As Thomas Frieden said, there's no rules in this world. So, Michael Dell can compete in my view with China. I think it's got the cost structure. It's got the supply chain with Hewlett-Packard splitting. And I don't know if Hewlett-Packard compete in the cloud and with China for very low cost. You used to work at Hewlett-Packard, but so. In the old days. Yeah, but it's going to be interesting to see. I mean, they have very strong customer relationships. Strong channel. The printer and the PCs are doing great. We're here with Dave Vellante on my Silicon Valley Friday show with John Furrier. Dave's special guest, obviously, Coast of the Cubes and CEO with me for SiliconANGLE Media and great to get his commentary. I want to get your thoughts on Silicon Valley opening its arms to Donald Trump and the impact of the start. I don't want to talk about the repatriation. We've talked about that many times in the show. It will be a boom to M&A, but the landscape, I mean, VC investment was down. Rob Hope just wrote an article featured on SiliconANGLE around the CB Insights Price Waterhouse study at VC Investments Down. Now, it's not down significantly from a couple quarters earlier, but the trend is down. And we've seen this cycle before. You and I know we've lived through many cycles of innovation. Certainly, as I have in Silicon Valley, you have in the industry, prices are high, prices get lower, prices for the startups, meaning the rounds of funding, and then it all kind of gets calibrated based on the exits. So we are now in a downward decline on valuations. So prices are getting lower, which means the VCs might get back in the game. Certainly when the prices are rising, it's an economic game. So this usually is a predictor of a cycle. Well, let me ask you a question. I mean, I feel like it's a positive trend and maybe taking a little bit of air out of the inflated valuations. I'm hoping it's not a long-term downtrend. I don't feel like we've been in a, I mean, even though the whole unicorn thing and we've seen some hyperbubbles, I mean, take a look at Nutanix. What's the question? Take a look at Nutanix. Nutanix tried to come out and do an IPO. It had to cancel the IPO. It had a very successful IPO. But I think, I thought that was healthy. It was like a healthy correction. You look at it. Well, they got a great CEO, great leadership team, great investors. Look at this Trump rally now. Okay, that's good. The market's pulling back a little bit. My question to you is, is this, you know, are we topping or is this slowing down a little bit for the next big step? No, it's a top decline. Okay, so in my mind. Do you think we've topped? We're past top. We're going declining. Okay, we're declining on valuations. Again, this nuance, but it's important to surface the data. You think it's a near to midterm permanent trend? No, so it's kind of multi-dimensional. I'll lay it out for you. So the VC data that Rob wrote about points to the economic side of the equation, which is investments. Prices got to get lower. And the VCs sometimes collude in this regard. They all talk, hey, let's not invest. And they see the herd stops investing. And then some of that happens. But that's also a symptom of the market outcomes, right? So that's one side. Startups always do well like Newtonics when there's a trough. If you look at all the unicorns, you look at all the winners out there, Uber, Airbnb, Newtonics, they all were funded as the price declines in the last cycle, and they're starting at the trough. And then what happens is they get their seed legs on the uptick. So I believe that the overall market's healthy, but I just think we're in a cycle, the shift to digital transformation, the digital to the cloud, as you mentioned, people are now aware of the cloud. So that shift is happening. So I think if you're a startup, this is the time to start a company. So I think I would quit your job, start a company right now, if you want to make it, because you don't want to start a company on the upward side of the cycle, because by the time you get the funding, by the time you operationalize, the prices and the valuations are higher. So that's just my opinion. So I think at the macro level, I think the technology business is in good shape. As long as the Fed doesn't screw it up with interest rates and Trump doesn't somehow screw it up and there's not some external factor that's out of our control. I think the macro for the technology business is really good. I think the traditional enterprise companies are in for a real ride now, with the way open source and cloud are eating away at the margins of the legacy enterprise companies, we're in for more pain. So the only way to grow is to gain share. That's why Michael Dell is so focused on his rhetoric about attacking HP, because he's got to gain share. And so, and I think big questions around IBM. I mean, I personally like IBM strategy, but they got to prove that they can take this whole cognitive thing, all this wonderful marketing that they've been doing and turn it into cash. And I think they can, but it's not a guarantee. So I think you're going to see a lot of the traditional legacy guys, HPE, Cisco, I think there's more to come. All right, so who's going to make the money? Who gets richer and who wins and who loses? Back to the clouds, a wrap up our segment. So who wins and who loses? You're a horse guy. You like to bet on horses. To me, SAS is the new control point in the tech industry, for the enterprise tech industry. And I think Oracle is actually well positioned. Love them or hate them. Oracle's got a strong plan and a strong strategy. I think SAP as well. And I think a lot of these emerging SAS companies, you got Marqueta in there, you got ServiceNow, I think Salesforce again, has a good model. Yeah, I continue to like Workday, even though they're kind of a narrow market. Amazon can keep the pace. Yeah, so Amazon, the thing about Amazon is their cost structure is substantially better than everybody else's. I've talked about this a lot. Their marginal economics at scale are superior to anyone else. Look at their operating margins. Amazon's operating profit is in the low 30s. You're talking about a company like EMC with huge margins, a business that's in the teens. Okay, so Amazon keeps getting stronger and stronger and stronger. I like Microsoft's position. Where's Google in the survey? Yeah, Google, Google. Is Google, are they even in the numbers? Do they even make the cut? They show the numbers because they got so much data, but I just, as far as the enterprise goes, they're less relevant. I mean, they got their data angle, but I don't know, they brought in Diane Greene, but I see Google fumbling quite a bit, my opinion. What do you think? Oh, I think they're way behind Amazon. I mean, they're not even close. Yeah, I agree with that. And I think Diane Greene's got a great plan because she gets the enterprise. She came from VMware. I think she's an amazing executive and should be out front in the center. But here's the problem with Diane Greene has. Google as a culture needs to give her full latitude to just kick ass. I'm worried about the Google culture. And the Google culture is one of academic, smart, in a good way, a good arrogance, you know? They got some swagger. The problem with Google is when it comes to enterprise, they don't resonate with the enterprise. They have bad arrogance. They're not resonating with the enterprise at all. Enterprise doesn't like any arrogance. They don't want swagger. They want less swagger. You know what the problem with Google is to a CIO, Google's risky. You're gonna bet your cloud strategy on Google, that's risky unless it's very narrow in a particular data segment. I am not betting my cloud strategy on Google. I'm probably not gonna bet it on AWS, although there are some examples. But I'm definitely not betting it on Google. All right, this is the Silicon Valley Friday Show. I'm John Furrier, Dave. Thanks for coming in to Silicon Valley, California. Good to see you. We'll be back next week. As always, eight o'clock on Fridays. I'm John Furrier. Thanks for watching, thanks for listening. And share this content with your friends. This is the Silicon Valley Friday Show. Thanks for watching.