 From around the globe, it's theCUBE with digital coverage of Commvault Future Ready 2020. Brought to you by Commvault. Hi, and welcome to theCUBE's coverage of Commvault Future Ready. I'm Stu Miniman and I'm joined by Dave Vellante here. Of course, we just had the keynote for Commvault Future Ready. Sanjay Merchandani, CEO. Davey's been there a little bit over a year. We're watching the transformation of Commvault as they're trying to go much deeper in the cloud. Of course, the space, data protection overall, backup and recovery, been a super hot one especially. If you talk about everybody accelerating what they're doing with the cloud, Dave, from an end user standpoint, as well as for Commvault. So, why don't we start with the company first? As I said, the move to subscription, the move to cloud, a lot of change needed, and that's one of the reasons they brought Sanjay into the company. Of course, he'd been at Puppet before that. He was the CIO of EMC before that. So, Dave, tell us your thoughts lately on Commvault. Okay, so Commvault, obviously, Stu has been around for a long, long time. And it's kind of a diversified player in the data protection space. I've always felt like they've had a more diversified sort of vision and portfolio. Sanjay took over, what was it, February last year? Yeah. Right, so he kind of came in and inherited a company in transition. And transitioning from what has largely been a legacy, sort of on-prem, software, perpetual software license business to now one that's transferring into a subscription-based model. Obviously, a large maintenance base, I think about 60% of the revenues comes from services, and most of that is maintenance, okay? So he's inherited that. And then they're going into a subscription model. So that's going to hit the income statement, and then boom, COVID hits. So Sanjay's getting it all from all sides. But Commvault's a $670 million company on a trailing 12-month basis. And the market cap's in the 1.7, 1.8 range. So they're trading at about 2.7 times revenue. So it's much better than a hardware company, but it should be better than that as a software company. So the challenge that he has is, okay, how do we get the company growing again? How do we transition to that subscription-based model? The good news on Commvault is their balance sheet is tremendous. I mean, they have no debt, no debt. Several hundred million dollars in cash, over 300 million, and zero debt, which is kind of interesting to me, Stu, because many companies during this COVID pandemic have tapped the credit markets. Commvault has chosen not to. Maybe they should right now with such low interest rates, and maybe that can help get the growth engine going, but I think they're very conservative in that standpoint, and obviously very proud of their balance sheet, but with the likes of Cohesity and Rubrik, and I know we're going to talk about that, pouring money into the market, trying to attack them, and we'll talk more about their position relative to those guys. You might like to see them raise a little bit of money, or take on some debt, and really go after some of those opportunities that you referred to up front. It is a hot market. Yeah, well, Dave, you talk about some of the newer entrants that raised just insane amounts of money when you talk about that space. Not only Cohesity and Rubrik, but also talk about Veeam. Of course, we've watched Veeam go from a change in ownership and how much money they have, and from a revenue standpoint, Veeam actually might be bigger than Commvault at this point. Yeah, I think so. They're billion-dollar bookings, they say. I mean, I believe it, but they're a privately held company. Commvault is, we can tell actually what their numbers are, guaranteed Cohesity and Rubrik are losing money. So their cost of acquiring a customer is huge. Commvault is, let's face it, it's servicing its install base, and it's mining that. And that's why it's cash flow positive. I mean, it's a very healthy company financially. The challenge that, again, Sanjay has is how do you get growth? They're a company, as I said earlier, in transition. Let me share with you, if I may, some data from our friends at ETR. And what we're showing here is the fundamental methodology of ETR, which is that net score, Stu. We talk about that all the time. ETR is, as I say, a data partner, enterprise, a technology research. Every quarter they go out and they say, based for each company in their various segments, are you adopting new, that's the lime green, that's the 2%, are you increasing spending, that's the 30%, and this is from the July survey. So this is relative to the first half. You flat, you can see that fat middle, 56%, and then you can see decrease is 7%, and that's in the pink, and then 5% replacing. So good news here is more people are spending more, more customers spending more than are spending less. Net score is the red subtracted from the green, so it comes out at roughly 20%, which is, that's certainly not terrible. It's a legacy company that's been around a long time. So you would see a company that's a newbie that's hot, that we've always talked about, UiPath, Automation Anywhere, Snowflake, they're in the 70% range, but they're much, much smaller companies, but they're growing very, very rapidly. So this is respectable and very common for a company that has been around as long as Commvault. Yeah, thanks so much for sharing that, David. Data Dave, of course, as you said, huge customer base, they've been around for a while. I remember when we first did Commvault go two years ago, very excited, very engaged user base, there was a good strategy discussion and an understanding for what Commvault needed to do to get to the cloud, but there was an understanding that they couldn't keep doing with the same team what had brought them to the place before. You always say, Dave, what got you to where you were isn't gonna get you to where you need to go. So talk a little bit about the keynote. Last year at Commvault, there were a couple of big pieces. Number one is they really had their first SaaS offering with Metallic, and what the momentum has been on Metallic is first of all, they made a big partnership announcement with Microsoft ahead of this event. Multi-year, Metallic has a few different solutions. One of them, of course, is to work on Office 365. So when we go to SaaS and we go to the cloud, we understand that data protection isn't something that just comes inherently. Some people thought, oh, hey, you know, I did it in my own data center, but once I go to the cloud, well, I'm sure it just takes care of things like data protection and security. The answer is I still need to think about it and the ecosystem has helped filling that gap. So Metallic was the first step and what we saw, Dave, really looks like a holistic refresh of the product line. Commvault back in recovery, Commvault disaster recovery, Commvault complete data protection, all aligning themselves to be more to what you were talking about going to that full, ratable model. And the other piece was Hedvig. So Hedvig software company helping them to be in more cloud-native environments and they launched Hedvig X. So it's the full integration of that solution. So less than a year from the acquisition to fully integrating it and making it an offering that's ready for what they're doing. So that's kind of their, is that their cloud play? Actually Hedvig is sort of in that space, right? Cloud, do you think subscription? But also Commvault is basically putting its stack in the cloud, right? And taking advantage of cloud services, right? Yeah, absolutely, Dave. Metallic specifically is built for the cloud. So let's talk a little bit about cloud. I have some other data here. And the cloud, if you pull up that next slide, the cloud has been eating away at on-prem vendors we know it's been growing at 2000, 3000 basis points higher than the on-prem business. But what this slide shows is that same net score methodology that we talked about before, but it's filtering, you can see on the left-hand side here, it's filtering on AWS, Google and Microsoft. So there's 585 AWS, Google and Microsoft customers in the ETR dataset. There's like about 1200 in the overall survey this quarter. And this shows that over time, the net score of Commvault in those accounts. So you can see, as I was saying, go back to 2018, you can see prior to Sanjay taking over this thing who's dipping and dipping, losing momentum coming into kind of the April survey and then July survey of 2019. And it's kind of bouncing off the bottom now. So it seems like they're making some progress there. And what we want to see is that momentum continue to grow. Again, net score is a measure of spending velocity. So what you want to see is as that transition occurs, more sort of net score increases over each quarter. Yeah, well Dave, as you mentioned earlier, there absolutely are some headwinds potentially there, but it looks like Sanjay at least has stopped some of the bleeding on this and stated goal of course to return to growth. And so we would want to see that go from just up one or 2% to be able to track with the cloud. Probably a good time for us to talk a little bit about the competition, Dave, because if you talk just in cloud markets, are you tracking along with the clouds? So the hyperscalers themselves, of course, growing at very huge percent, a company that's been around as long as Veritas isn't necessarily going to be doing 35 to 70% growth, as you would see from AWS or Azure. But what do you see out there for some of the competition in general? Who are some of the key players that we need to look at? Yeah, so I mean, think about the backup guys. I mean, the traditional space, you've mentioned Veritas. Veritas, by the way, in the ETR survey data is not playing well, they're in the red. They've been losing share, the shared donors as they say. You've got some big players, Dell EMC obviously, kind of living off the data domain base. Remember, Dell EMC fell behind. Prior to the Dell acquisition, they weren't investing heavily in the data protection business. They were kind of living, milking off that data domain base. They had, back when you were there, they had the networker and they had Avamar. And so there was a bifurcated thing. Frank Slutman came in, he tried to clean some of that up, but then he was on to his next big thing, of course it was ServiceNow. And so, Dell is a big footprint, obviously, but they're very hardware-centric, as you know. So they have a big hardware agenda. IBM with Spectrum Protect, Veeam was hurting them. They did the deal with CataLogic to kind of stop the bleeding, they kind of did. Again, big install base, and then you got the sort of newcomers. Veeam was not really a newcomer anymore. I think they've been around for 15 years, big acquisition, decent momentum in the market, especially starting the Microsoft base, and they're kind of everywhere, so you see them. And of course, you see Cohesity and Rubrik spending a lot of money, as you said. And it's interesting, let me pull up this next data point. In the ETR data set, this past quarter, you saw Cohesity actually overtake Rubrik. Rubrik was very, very strong earlier on. They're kind of neck and neck in this chart. What this chart shows is not net score, it's now market share. Now, market share's not real market shares, too. It has to be cautious here, because it's not like IDC tracks market share. What it is is pervasiveness in the data set. So in other words, within this segment, the number of mentions of the vendor divided by the total mentions in the segment. So it's really pervasiveness or presence in the data set. And what this shows is, you can see we've got 65 Commvault customers in the survey, and it shows the impact of Veeam, Rubrik, and Cohesity in the Commvault base. And you can see up through, let's see, that's the recent surveys is, you see the increases up to the increasing red line is Veeam, and then you got the Rubrik line, and then the Cohesity line. But they're all recently, since the October 19th survey, down, trendering down. So that says to me that Commvault is holding serve within its own base and actually doing better as these guys are declining in this base. You can see the comment that ETR made, Rubrik, Cohesity and Veeam are all seeing market share declines in shared accounts with Commvault. So that's good news. I think this is very important to do, and here's why. This Commvault has got to hunker down and maintain those customers. It does not want to be a shared donor much in the same way that Veritas has been. So that's a quick scan of the competitive marketplace. And again, from my standpoint, I'd like to see Sanjay maybe get a little bit more aggressive. I like the acquisitions. Hedvig, that's great, doing actually some more subscription. But I'd like to see him go hard after a cloud native. I have to dig into that. Maybe you can comment, but really cloud native and multi-cloud across clouds, being able to have that same experience on-prem as I do in the clouds at very high performance, very low latency. Yeah, well, Dave, first of all, one thing, talk about the competitive win rate. That's something you always look at is how are you doing against the competitors? Not only did Sanjay come in, but you saw changes along the channel chief, I believe, in the sales people. So definitely reinvigorating that piece of it, as well as, Dave, we saw in the keynote. So the portfolio is updated. So an aggressive engineering investment, some through acquisition, some through changing the code and moving in these environments, leveraging partnerships. Great to see the Microsoft one. Love to see something along the lines of Google. We understand Amazon, you play in that ecosystem. It is challenging to necessarily partner deeply with AWS unless you're one of a few strong players in the marketplace. But working closer in cloud. And Dave, one thing I point out last year, one of the things that really impressed me at Commvault Go is they did have some good developer action. So when you talk about cloud native, of course, enabling developers is one of the key things. Like many companies out there, inside the company, you've got developers. So how are you unleashing that? So Hedvig, a good acquisition along those lines. But in the middle of the show floor, they had people that you set up with whiteboards and just go at it. So it reminds me of days past when you used to have these engineering driven shows where you could go in and really understand that. So helping the developers enable them, backup and recovery just needs to tie into all my dev ops and IT ops and all my other environments to make things just more automated because also you talk cloud native Dave, automation has to be a big piece of it. And to your point, we actually have really good guests coming on the program. Not only will we have Sanjay, relatively fresh off the keynote, I've got a panel with the product people to really dig in and understand that. We'll poke and prod at some of the cloud native pieces and understand where that's going. Got their head of strategy also on the program. Yes. So I mean, I think you're making a great point about automation and just speaking about M&A for a moment, I like M&A, I like growth through M&A. I'm comfortable with that as long as it fits into the portfolio, your point about automation, I see opportunities there for M&A, things like visibility, observability, obviously hot analytics, automated operations, IT ops, anything that sort of removes labor and complexity and gives me visibility across clouds. That I think is something that could be interesting. Again, as long as it fits into the portfolio, I'll say this, I mean, Sanjay was at EMC and knows M&A because I have no doubt they were bringing all their M&A candidates to Sanjay and saying, okay, what do you think of this tech? Do you use it? Probably kick the tires a little bit. So he, I'm sure, was a part of those and he saw, I'm sure he saw the good, the bad and the ugly and you were there, EMC was pretty good at acquisitions but then it got a little out of control. And Dave, talk automation, Sanjay came from Puppet. Puppet was one of the early companies along helping people move along from those manual tasks to how can we automate those. So absolutely, Sanjay now a little over a year in there starting to see from the product standpoint and expect to see some of the trailing results as to how that moves forward. Yeah, and then again, blending that whether if it's a tuck in or whatever, maybe there's some big chess move out there. I would suspect given Commvault's conservative nature, you wouldn't see that, although they could do it. I mean that their revenue level, their balance sheet would allow them to raise some debt if they wanted to do that, now would be the time to do it. But it's interesting, everybody's doing it and they're not. So I kind of like the contrarian play but given the opportunity in the market, given the TAM expansion through beyond backup into data management and it's a cloud and multi-cloud I do think there's maybe an opportunity for them to be a little bit more aggressive. All right, well Dave, thanks so much for helping us dig in and kick off our coverage. You're welcome, Stu. All right, stay with us. We have a bunch of interviews here for Commvault, Future Ready, I'm Stu Miniman and thank you for watching theCUBE.