 Live from New Orleans, it's theCUBE. Covering VeeamON 2017, brought to you by Veeam. We're back, day two for theCUBE. We're here at VeeamON in New Orleans. theCUBE is the leader in live tech coverage and this is VeeamON 2017. A lot of cloud talk going on here. We're going to keep the cloud discussion going. Matt Kalmanson is here as the vice president of North American Sales for the cloud service providers. Great to see you, Matt. Thanks for coming on theCUBE. Thank you for having me and great to see you again as well. Yeah, so like I said, a lot of talk on cloud. I mean, you guys are really focused on that as sort of the next wave of innovation beyond virtualization. So give us the update from your perspective in terms of what you're seeing from your constituents. Yeah, absolutely. You know, while today at the VeeamON conference at VeeamON, it was cloud day. We really like to say every day is cloud day. I mean, if you- Here, here. Yeah, exactly. And if you think about our business, it's going to continue to grow and it's going to continue to grow as the cloud grows. And as the leader for the Veeam cloud and service provider business in North America, as our business grows, our service provider business is absolutely just going to grow in tandem with them. Everything we're doing is gearing up so that our service providers can be a part of our exponential growth. Pat, can you just give us a little color of those 18,000, you know, service providers, you know, global reach, you know, the breadth and depth of the partners that you have. Absolutely. If you think about the service provider community, it's really a broad topic, right? It's really a broad topic, meaning it's not just backup as a service. It's backup as a service. It could be disaster recovery as a service. There are those that provide complete infrastructure as a service. And I can go on and on, right? That means talking about companies that are offering software as a service and how do they back up their customers' data? So again, anything that's provided as a service really falls under our Veeam cloud and service provider business. And if you think about the numbers that we've been talking about today in one of the keynote speeches, we heard that IDC is saying by 2020, so what's that, two and a half years away, some 48% of all IT spend is going to be in the cloud. That's just tremendous opportunity. If you look at AWS, at the last year, I believe, announced earnings of somewhere of around $10 billion, right? And just a handful of years ago, that was close to zero. And you see the exponential growth of Azure, right? And the reality is not any one cloud, even though we're seeing this exponential growth across all of these different platforms, there isn't any one cloud model or cloud provider that's going to be right for everybody. So that's when it comes back to 18,000 cloud providers across the globe that are offering various services to meet the demands of the marketplace, no matter what those demands might be. So interesting, what if we could stay on that for a minute? So not only is AWS growing, you know, meteoric rates 30, 50% a year north of 10 billion, but their operating profits are enormous. And non-gap operating profits, depending on what quarter is in their low 30s, when EMC was a public company, their operating profits were half that. So here's AWS, both ostensibly supposedly cutting prices, but they're driving huge margins. So my question is, when your customers see that, the cloud service providers that you're servicing, when they see that, how do they respond? Did they say, okay, we're cool because we're differentiating, we got to keep ahead of the market, stay ahead of AWS, do things differently. We heard some of the folks that you work with earlier say, hey, we focus on high-touch service. Others focus on specialized DR. What are you hearing from that base? Just about anything and everything you can imagine, right? So it's a really great question because when you think about the cloud, very often we think about the change in technology. It's much more than just a change in technology. It's a change in the entire marketplace. This is a monumental shift in not only technology, but in consumption models as well. And that consumption model changes all the way through the ecosystem. And if you think about it, we have end consumers who are saying, how do I consume technology today? Do I buy on-prem? Do I buy in the cloud? Is there a mix? Do I pay CapEx? Do I pay OPEX? Then if you think about those that service, that end-user community, resellers and the teams that I'm responsible for that are cloud service providers, they're offering some mix of those types of services. They sell on-prem, they might sell in a cloud, they might sell in a hybrid cloud, right? So they're starting to see, and then even us as a manufacturer, we start to see monumental shifts from, do we sell all on-prem, all in the cloud or somewhere in between? So we're starting to see that it's really important that you understand what's the customer's consumption model, what's their business desire? And then by default, our service providers will either have the right model for them or end customers will find other service providers that do. So what a lot of organizations are seeing today is as they transition a lot from on-prem to this cloud model is a change in operating models completely to a monthly recurring revenue model. So when they see that model, while they want to really accelerate that monthly recurring revenue model, which will often increase margins over the long term, there still has to be that balance between providing exactly what that customer wants no matter where they are along that cloud journey. Yeah, so Pat Gelsinger, the famous, the cube quote, was if you don't ride the waves, you're going to end up driftwood. And so in the last five years, a lot of the cloud service providers that you're working with have had to shift their business models, find new ways of driving revenue and value. And one of those was creating these ongoing streams of revenue. Absolutely. How do you see, so I'm always fascinated by a company like Veeam, a software company that can help a cloud service provider essentially monetize their services and create these new, ratable business models. How does Veeam do that? Yeah, it's a great question. And it's one of the great things about working at Veeam. I'm here representing the Veeam sales team for our cloud and service provider business. And I have a team behind me that supports our 18,000 all responsible for North America, so a subset of those 18,000. The reality is everybody in the organization is lined up to support and sell with or through those service providers. So I have the luxury of representing this vast community of Veeam cloud and service provider community, but the reality is we have compensation models in place that allow what I would consider my traditional sellers to receive the benefit if their customers decide to choose a cloud platform and buy through one of our service providers, they still get compensated. As a matter of fact, they get compensated in a very rich manner. We have some incentives so that they can be agnostic when they go into a customer. We have the best solution in the industry. You consume any way you want. That's just one way. That doesn't even touch upon the marketing support that we give these organizations. How the heck do you support 18,000 partners like that? I mean, how do you give them the, I mean, everybody we've talked to is like, oh, we love working with Veeam, they're that, so they're unbelievable. How do you do it? How are you able to, at that scale, give that level of service? Yeah, it's not any one group or any one person that's really providing the focal point of that service. So we have lots of service providers that have very niche businesses. So they might be rather small organizations that we service through what we call our aggregation community, right? The insights of the world, the ingram micros of the world. They service our providers. We also have extensive inside sales organizations that service our providers. On top of that, we have field sales people that service our providers. But I also go back to not only do we have the sales teams to back them up, but we have this partner ecosystem, our aggregators. And we also have rock solid technology, which a lot of times will make our jobs a little bit easier. Meaning, if a customer, in this case, a service provider can download a copy of our software and turn up a business, it takes a little bit of the burden of day to day management of working with that service provider and it allows them to get to a revenue stream, time to value shorten and they become profitable quicker. Now, again, it's not just my team. It's also our direct sales team who has benefits in seeing our service providers be successful, so they're willing to chip in. Our channel community, which I'm sure many know is a very extensive channel community. We have programs to tie together channel and VCSP, being cloud service provider ecosystems. So then we leverage the whole channel team, which also has a vested interest in the success. So I can't answer that question with one or two bullets. I look at it as product, dedicated teams, extended teams and compensation models, which gives everyone the mindset we have to make this work for our communities. Matt, you've been a service provider yourself. You worked with one before you joined Veeam. I wonder if you could give us a little bit of insight just as to kind of the state of mind of service providers today. I think back, we know service providers have to keep costs tight because they need to pass that through to their customers. There's such a diverse ecosystem out there. There's big pressure from the public clouds. Where's state of mind with them? What are they excited about? What are they worried about? What are they excited about and what are they worried about? As was mentioned in Peter McKay's keynote here at Veeamon, it's the best of times, it's the worst of times. So what are they excited about? They're excited about everything. How can you talk about a marketplace, right? Like all cloud or 48% of IT budgets are going to be spent in the cloud. How can you not get excited about it if you're a cloud provider? If you look at Veeam's own growth in the cloud, 60% quarter on quarter comparative growth, phenomenal growth. So those are things we're all excited about. Think about the announcements we heard today. We heard about the AWS announcements and some tighter integrations, what I would consider the hyperscale public clouds. Phenomenal things to always get excited about because those create opportunity. What are they concerned about? When we start to have more integration into public cloud offerings, some of the smaller service providers might really be thinking, well, what does that mean to me? What is the next revolution within this industry and is that going to leave me in the lurch? How do I compete with all these other service providers that are coming up market? And the way I like to really look at that and what we tend to do to put their mind at ease is remind them the best of time and the worst of times. What we have to do is stay ahead of the curve. And one of the way we stay ahead of the curve is by making sure they understand there's always choice. And that's the key, that there's always choice, meaning a service provider continues to evolve their business to make sure that they have some of their own cloud services if that makes sense for them. They also can leverage and provide services on top of, let's say, an AWS or an Azure. So there's lots of flexibility and nimbleness in our program that no matter what our customers want or you as a service provider want to become, there's lots of different ways to skin the cat, for lack of a better way to put it, to take advantage of the best of times and hedge against what might be viewed as the worst of times. Yep, you mentioned the public cloud and how that interaction fits. Definitely what we hear and was talked about this week is that multi-cloud environment that customers have. Veeam's going to span virtual and physical on-premises to SaaS and to public cloud. It felt a little hazy the last few years to try to get to that kind of hybrid and multi-cloud. The service providers feel that they understand where they fit. Obviously there's the competitive dynamics, but what services they offer. Things like Azure could be a natural extension for many pieces. Amazon might be a little bit more competitive for some, but is that give and take as opposed to what it used to be? Dave gave a pack Elcindor quote, there was the VMware quote, like when the bookseller wins, we all lose. Do they understand the competitive dynamics a little more and willing to kind of partner, understand what they do and what some other services can fit? I firmly believe that the industry is maturing. Our service provider community is really maturing and they're learning how to build what I would call a, or what you may have heard of already, is a co-optition type of environment. And they have to in order to survive. And the reality is I think back to the mainframe days when we used to read articles about the last mainframe being plugged by the year 2000. We all know that hasn't happened. Tremendous workloads being run on mainframes. I kind of look at it as that's similar dynamic. I'm not so sure we're ever going to go to an environment where everything's 100% cloud, but it'll probably somewhere in the 33, 33, 33. 33% being on-prem and staying on-prem for various reasons. Maybe it's another third or somewhere in that ballpark being in a complete public cloud, a hyperscale of public cloud because they need some flexibility and nimbleness that they might not get elsewhere. And then another third or somewhere in that ballpark staying in a fully managed cloud environment because customers still want a very local feel perhaps. Maybe they want somebody who can help them. Then they pick up the phone and they know their business intimately and they're more of a hands-on type of environment. And I think as our business progresses, as the industry progresses, becoming much more collaborative, realizing that some of the people I view as perhaps my biggest challengers can also be my biggest friends. So Matt, it's definitely the decade of the cloud here. Last question, the bumper sticker on Veeamon 2017 for you. The bumper sticker for Veeamon 2017, great question. Would be the cloud is here and Veeam is ready to provide availability for the cloud in any way, shape, form that it comes. Love it, Matt. Thanks very much for coming on here. You're having me. Good stuff. All right, you're welcome. All right, keep it right there, buddy. We'll be back with our next guest. This is theCUBEer live from New Orleans, Veeamon 2017.