 in San Jose, California, in Silicon Valley for Brocade's analysts and technology. I'm John Furrier with SiliconANGLE.com. I'm joined by my co-host, Dominique Mann. This is theCUBE, SiliconANGLE.tv's flagship program. We go out to the events, extract a signal from the noise, and we're seeing a huge, massive trend around software-defined data centers, software-defined networking, software-defined everything, software-defined radios, as we see in the iPhone, which is an iPhone 5, which is announced today. So the world is changing, big data, complete revolution from the data center to the cloud to the end user, and we're excited to be here at Brocade's corporate headquarters in California and with the CEO, Mike Claco. Welcome to theCUBE's special edition at your headquarters. Thank you very much. I'm delighted to be here. Thanks for having us. So, one, I want to talk about a couple things. One is, you're the CEO of Brocade, which is really in an interesting position as a networking vendor, because VMworld and within the industry, this notion of re-changing the engines of data centers and clouds is kind of going on, and people are opening up the hood and looking at the engines of the technology that powers the iPhone 5, that's powering all these mobile apps and clouds. So, tell us, one, what's going on with you guys right now? You got to be excited. We're going to talk about some product announcements shortly, so give us your view on the industry right now. Well, I've never been more excited to be in this space in my life. There's more change going to happen in the next two years than it's happened in the previous decade. And when you look at just the enormous growth in data and network traffic, first off, nobody knows how to turn it off at all, the data growth. And there's a variety of different reasons, the rich video content and all these new devices. You just mentioned the i5, I mean, it got announced today. I love the fact that it's 100 megabits. I love the fact that it has all this rich media content and denser cameras and so forth. All that does is try bits on the wire for us. And a lot of the networks really weren't designed for this. In fact, most of them. And so they have to go through some type of upgrade. And if they're going to go through an upgrade, they're going to go and upgrade to what's going to take them forward for a decade. And that's what we're building. Before we get in with Stu, I want to ask you some specific questions around his perspective as an analyst. But I want to ask you, as the CEO of Brocade, you guys years ago took a step back while Juniper and Cisco were doing their thing and networking, you guys had a great market position. You had to make some big investments. You're going to take us through your lens there when you made these big investments with what's going on with Ethernet, because that essentially was the plumbing, the core technology that's powering cloud. Take us through those investments and how that shaped out and how do you feel about today's prospects? Oh, that's great. I'd love to do that. In fact, let me go back four plus years ago. We made an investment and we thought there were going to be two very, very prevalent technologies. The world was going to virtualize everything. Server storage networks. So we thought that virtualization was going to be prevalent across all areas of the data center. And then second, cloud-based computing. In fact, a lot of people had really interesting things and really didn't know what a cloud was and you heard about private and public and hybrid and all these different clouds. We said, look, cloud-based computing is you're going to be able to take an application and run it anywhere regardless if it's inside the four walls of the data center. So we looked at that. We said, what products are actually built for virtualized enterprises? And there weren't any. And so from a network perspective, and so we launched this effort and we bet on a few things. In fact, two and a half years ago, we start talking about software-defined networks before anybody ever mentioned the term. And we made the first investment in an open-flow lab a year and a half ago in Tokyo where we had an enormous interoperability testing lab. And people were scratching their heads, said, you guys are betting on something that's never going to happen. And now we've got four years underneath our belt. We've got a whole new product set that are just purposely built for this east-west traffic goes on these virtualized cloud enterprises and we're very, very well positioned for another decade right now. Stu, we were at VMWare. I want you to comment on your take on a couple things in the CIRA acquisition at VMWare. That took the industry by surprise, essentially just had a $50 million investment on DC and then they sold for a billion dollars to VMWare. That kind of really rocked the networking world. So Stu, tell us about that perspective and then how the software-defined networking or network virtualization market's changing. Sure, John. So I don't think, well, the acquisition and really the scale of it. I mean, over a billion dollars for as you said, very small dollars was surprising. But if you talk to people in the networking world and in the industry in general, we saw some big transformations from VMWare on the server side. We saw lots of acquisitions going through scale-out architectures and things like day-to-day duplication on the storage side. And networking was ripe for a change. We've actually been riding this wave from kind of one gigabit to 10 gigabit for over a decade now. I mean, in 2002, the standards were out of five. Networking takes a long time to change. So we knew there was an opportunity to change. Being able to put in that layer of abstraction to really simplify an environment just makes sense. There's other ripple effects you need to consider as to things break, such as when VMWare went in, it really did mess up a lot of things on the networking side and the storage side. But networking, we know fundamentally needed to change, there was a lack of innovation in the networking side when it was dominated by single vendors, so Brocade is a company that has the trust of its customers. I've worked with Brocade for over 12 years. They're still dominant in the fiber channel market and storage, and one of the questions was how does Brocade move from being a trusted storage advisor to really being the networking alternative out there and trying to hit on these new trends? Mike, so I want to ask you on that, because I want to get to his perspective, because Martin was on the Cube at VM World and he was really passionate about, he's a super geek and he was very forthright. It was a really epic video interview. It was really his first real public video. But he really talked about changing networking. He was passionate about that. So you guys made that investment. So obviously there's a lot of noise going on right now in this software defined networking area. So open flow, obviously an academic project moves into commercial path, go to market. So it's still an emerging technology, but you guys actually have product. So take us through the mind of the marketplace, the CIO, the IT executive, folks that are actually looking at the data center and looking at things like flash and hybrid cloud and re-architecting some of the elements. Take us through what can they do today with you guys from your investment you've made? Well I think when I look at it from a CIO's perspective, they want to change, but they want to change at the rate they can absorb the change. They can't rip and replace everything. So they have to do it in incremental steps because they got to run their business number one. And when I look at the changes that are going to happen in the networking space and you hear all these things about software defined networks, a lot of confusion. I mean it's like cloud was years ago and so forth. I'm going to look at it in four different layers. First off you have to have actually the networking technology. The hardware doesn't go away, it just doesn't go away. And so we build that around ethernet fabric technology and so that becomes the foundational product when you start building a software defined network. Then you move up one layer, then you have the virtualization abstraction layer. You know the nice series, the open flow, the open stack, NGVRE, all the different areas around that. Move one more layer up and it's the application layer. And that application layer you can do some really really interesting things around management, mobility, the extension of the walls, and then finally it's the cloud management. It's ripe for opportunity, but we're actually working at the fundamental basic building block level. And then you have on top of that these different levels that are going to go ahead and mature over time. What's very exciting for the CIO is when we talk to them is that underlying technology and that foundational level allows them to build at their own pace with different technologies and they can build that out throughout their entire enterprise. So if I could just, I actually wanted to commend Brocade what I liked about kind of the message of today, it's simplicity through innovation. It is. And networking is really a wonky, complex environment. I mean you go talk to some of the geeks that you've brought in here and we're talking seven different protocols and different overlays and how the things interoperate and it's a complex environment. And so can you talk a little bit about how does the kind of Ethernet fabric lay the foundation that how does that tie in with SDN which is a little bit more complex? Well let me just do it at the highest level. One of the design points I gave my management team is from a, I mean my engineering team from a management perspective was you could have no management system. It had to be self healing, self discovery, self management and so to do that we needed to build that into the technology itself, into the ASIC technology. We have our own administrative channel, we have lots of really interesting things that are in there that, you also need new standards along the way and that's why we went with Trill based architecture because spandex tree is inherently inefficient in terms of long term of building these fabrics out and so you needed this standard going forward. It's interesting is, I challenged the audience in here to come tweet by assembling a fabric. We have a group called the Mouth Squad in here. The Mouth Squad which is quite interesting is 4th through 12th grade around the country. They come in and they help in the school environments. It takes them 120 seconds to create a fabric. 4th through 12th grade, 120 seconds. I've been in some network environments that it takes weeks if not months to assemble to go ahead and network topology. So this is radical, massive simplification that then you can, if you don't have to worry about that, now you can start worrying about the virtualization layer, the application layer, the cloud management layers and so we've got the base layer right and that's what's got all these CIOs so excited is you plug it in and it works. Works really well. The scalability question is huge too. So obviously there's a lot of pressure in the marketplace. I want to talk to you specifically about work-based growth strategy. Obviously you're making an announcement here. We're going to drill into that in the second round. Ethernet fabric which is the underpinnings of the web, of the internet and all networking. So there's a couple of factors I want to drill on around and how that relates to your growth strategy going forward. One is obviously the trends are our cloud mobile social icon was seeing all that but in particular data, tsunami, a lot of new data being generated, both machine to machine and also all kinds of big data. Traffic isn't exploding. We see the iPhone, LTE, we can see more traffic. Face time over cellular now. That was a big announcement from Apple. So just an explosion of traffic, all kinds of omnidirectional, weird traffic, east, west, north, south, all over the place and then software and then policy. Everything seems to be policy based and having that dynamic environment. So given that, these are the big areas that you drill down on. What is your growth strategy going forward? What markets or what market and markets are you attacking to take it to the next level? Let me break it down into two or three because there are lots of sub segments within the major markets. Number one, I'll just talk about data centers. That's our core strength. That's our heritage and the company that we've grown up in. Highly complex environments, mission critical applications, Fortune 2000 accounts. That's not gonna change and so we've made a commitment and we're gonna continue to make it a commitment in the fiber channel market space there because it is a trusted true supplier of product in that space. So you'll continue to see us enhance it but we're going to focus again on the simplification and the management of that area. We've got great hardware technology out right now. In fact, the transition to the new hardware technology is in the past decade, it's the fastest transition to a new technology we've had in a decade and so the need is there. So that'll be one is the data center. The second is when I talk about the service provider marketplace, I'll move to that. Every data center, CIO is actually trying to become a service provider internally and every service provider, traditional one, is actually trying to become a data center and so we're taking those two skills and we're kind of staying, keeping within our knitting there. Those two markets in itself are somewhere between 36 and 40 billion dollars. That's enough market for us to focus on and there are sub-segments underneath it but that's where we're gonna continue to focus. A question on that because when I look at your overall market, we're talking mostly about Ethernet here but your sand environments, there's been a lot of discussion of does Fiber Channel go away and those of us that watch this say really Fiber Channel is trusted and it works and it's not a new technology that replaces it, it's a new business model and the business model that probably has the greatest opportunity to displace the data center are the service providers. So every Ethernet solution that you sell to a service provider like the Pete Colos and internet twos and all those guys that you've got here that's less new data center switches that you're gonna sell on the Fiber Channel side. Can you reconcile that? Can you grow in both still or is it a transition that's going to happen? I can't find, everywhere I go in the world I can't find anybody anywhere in the world knows how to turn off data growth, anywhere. In fact, it's triple digits in most places and we can go on for hundreds of examples on why that is the case. Regulation, there's 8,000 laws in the world on the management protection and storage of information. So we over-regulate. Okay, so we can either fight the laws or we can go ahead and figure out how do we manage within that? And so that in itself is one area when I look at just actual storage growth and there's lots of new media coming in around flash and so forth and you mentioned that earlier that market is gonna be around for another decade. Everybody kept predicting this will be the year that FCOA takes over Fiber Channel. We said, no, it's not gonna do that. Fiber Channel will continue down this path for a long, long period of time and it's tried and true technology and it'll be there. So that market will be there independent of the new markets that we're going to go ahead and address. You think about it, that's a couple billion dollar market. The other one's 30, 40 billion dollars. Even if I was displaced a small piece in some of the service provider and internet twos and guys like that, that other market has tremendous growth opportunities. So if I hear you correctly, build off your base which is the Fiber Channel, solid position in the data center and then also service providers and then move quickly to that ethernet fabric which is the new product line that you guys invested in. That's kind of what we're talking about today. What's next? So what's the next trend that you're investing in looking around the corner on that takes you, takes brocade beyond the ethernet fabric? What's the next step big Mike Clayco vision? Well, so ethernet fabric is good for another decade. So that's a good one to kind of- Ride that one for a while. Yeah, so we got one out for a decade and we have the entire- Well, let's stay with that. Let me reframe it. So okay, ethernet fabric, we need a lot of build out required to new stuff, dynamic infrastructure, self-dealing, all that's great. We need that fast. Overlaid with complex laws and compliance and cloud, all that other stuff is crazy and it's needed, so that's a build out plan. What within that framework is needed the most from an investment standpoint, as you look at the core tech that you guys are investing in in R&D. Well, we made a big bet as I mentioned before on, before it was really called software to find networking, we made a really big bet and so all of our baseline technology is software to find network enabled. And so you're going to continue to see us invest in that area of the business in a very large manner. I mean, the whole software side of that business, when you have that underlying base technology we can do some very interesting things around the management side of that and so you'll see that is the next wave where Brocade will kind of differentiate itself from the market. So demystify the software to find networking and network virtualization trend that's going on right now. Obviously it's emerging, everyone's talking about it and everyone's kind of reevaluating their position and all the other vendors. From your standpoint at Brocade and you bump into someone in the hallway and the elevator or cocktail party and they ask, hey, what's all this stuff about software to find data center networking? Demystify, what's really going on there in terms of deliverables? Where's the meat on the bone as we say in that area? I think the deliverables is when you look at the ability to rapidly provision commission or decommission applications regardless of where they sit within a network on the server, on the storage, in the data center, on the wide area network. If you can do that with keystrokes and management systems versus very complicated command line interfaces that's really what it is. And so it's the ability to manage this in a very simplistic fashion. I mean, we just announced today that our products built in, we have the ability to stripe information between switching products. The user has to do nothing, nothing at all. We actually just take a look at this and we load optimize it and take the load between the switches, very, very simplistic. So as you add more and more applications or as more traffic goes east and west or you get just inundated with hits, we actually just do all the management for you. If you had to do that manually, you don't have enough technical people in-house to go ahead and do that. And so those are the type of things that we're talking about. And we don't even know all the applications. They're going to be developed because we've enabled them now. We're talking to some companies right now in that have that are doing genetic research in genome projects where we're talking about trillions of bits of data. Never in the past could you actually move this data to ground networks and now we're talking about, wow, maybe we can actually do some things that could solve cancer and enable those things. So we don't know what the art of the possible is. We were just at Intel ID after the developers are geeking out on all this new compute and obviously low cost, I mean low energy, higher compute, so it's more of a loss kind of kicking into gear that affects you guys. But I wanted to get your perspective on two things you can illuminate for us. One, your experience right now with the new set of products, your technologies you're launching, with customers, what are you seeing in terms of use cases where people are really practically taking it, putting it into production and buying the technology. And two, emerging areas where there's development and or action going on like open stack and open flow. Where there's some, I won't say R and D, but real emerging innovation going on. So customer environments with the new tech and areas of emerging innovation. Okay, so one of the things I can say is I use the number of beta customers as kind of a litmus test and we were over subscribed the first day we went out and asked would you be interested in a beta of this new technology? That's a good litmus test. The second is would you buy that product after the beta program and we're almost universally, can I buy more? That's usually a good test that you have a good product and a good offering. There's demand. That there's demand in that space. And so I look at that as a good litmus test. The other thing is when I look at, go ahead. Why was the demand there? I mean, so was it like they were thirsty for it? They have real, was it the massive headaches? It just massively changes the life of the people who have to go ahead and administer this. It is so simple to use. I'm going to challenge you if you tweet when you go over here with the mouse squad and you do a tweet and we'll donate $100 to the mouse squad for doing that. You can assemble a fabric in 120 seconds and I will tell you, you've not done this before, right? You have not done this and it'll take that, it's that simple to go ahead and do. This is orders of magnitude different in terms of- So people are falling out of their chair. They're falling out of their chair. So that's really good. Okay, so that's- The other thing is the demand that we're seeing in our traditional product set. We announced we were the first to market with 100 gig technology. When we came to market with 100 gig and began shipping it, within 90 days one of our customers came and said, can you actually put 10 of these links together and give me a tear of it? No matter what speeds we ship, which is interesting, somebody will find an application and apply it to another problem they're trying to solve and the art of the possibly becomes possible. And so that's the other thing that's really interesting is as we push the envelope, we find new applications. The new applications form new business opportunities for us. So that's kind of- So all the big customers, can you talk about the numbers and some of the profiles, do you name names or- Well, we did. We named a bunch in our webcasts. We named an example of just a few. I mean, I don't know what we had a couple dozen up there. There's 700 production customers right now that we really focus on. And what's interesting is if I go- And that's 700 of VCS technology- VCS customers, yes. These are real fabric, not Tapper Rack stuff. We got thousands of those. And a lot of those have been looking for the bigger configuration- They have. That they now get with the- I mean, I had one customer said, look, when you can give me 100,000 VMs, and I can put it in a chassis, come talk to me. So now we can do 320,000 VMs in a chassis. It's interesting, as I already had a customer who said, now, you really want to make a change? Give me a million. Now, I mean, no matter where you go, there's always one more- You got to push the envelope. So we're going to continue to push the envelope in that space where we actually said that the product's 100 gig ready. And so when that product is ready to ship on this chassis, which will be sometime next year, but it's still the densest product in the marketplace right now. And it's going to 320,000 VMs per chassis. And we're seeing VMware just explode with growth as well. So obviously the VM side of it's huge. It's changing a lot of the dynamics inside the data center. And so that brings me to the second point of the question. Open stack and open flow, these emerging areas. How is that developing? How do you see that evolving with this massive change over? There's a lot of, you know, we're not sure where all that will land. And nobody has a crystal ball on it. Like I said, we made an investment in OpenFlow a couple years ago, we put a lab in place because we didn't know what we didn't know. And so one of the things we did is we optimized our products to take advantage of the features out there, which is good. Same with OpenStack, same with the Microsoft products, same with VMware products and others that are along the way. And when you get past the top four or five, nobody else counts, in my opinion. And so what you'll see is we're going to go ahead and work equally well with the top four or five. Question that I want to ask you on is as the data center evolves, we've always talked about the data center operating system. There's a lot of areas that are doing well right now, obviously cloud, database and stuff like that, social, mobile, but machine to machine and systems management is an area at VM where they talk about abstract pool automakers. So on the automation, that's a really big thing. When you deal with virtual machines and dynamic provisioning of applications, where are you guys at with that and where's the industry relative to some of the automation challenges? I think that's the third layer, as I'd mentioned before. First, you need to have a very robust network infrastructure, we got that. Then you need to have an abstraction layer, which now you're seeing standards come out of OpenFlow and OpenStack. And the third one on top of that is the management, is the application layer. I think it's wide open. I think that whole layer right there is wide open and you're going to see lots of venture money come into it and a lot of other things. Great opportunity for us to start. I have this final question for you because we've got a break. Tell the folks out there about where the state of brocade and where you guys are going. It's healthy, the state of brocade is really healthy. Financially, we're very, very healthy. Product-wise, we've now got a product cycle that will last another decade at this point in time and we continue to innovate and we've picked the right markets, we think. We picked virtualization, which early on, we picked cloud-based, we picked software-defined networks. We think there's lots of legs in those markets. And then more importantly is we are very, very well respected in the data center and the service provider market, which seem to be high growth opportunities. You take those two together and I think the future of brocade is very bright for a long period of time. Mike Claco, the CEO of Brocade, the old expression, skate to where the puck is going to be. The market's spinning in the right direction. You guys made some great investments, congratulations. Software-defined networking is changing the world and you guys are in a great position, congratulations. We're here at the Brocade Tech Day, here at the Analyst Day in Silicon Valley. I'll be right back with our next guest.