 Hello and welcome to this special VMworld preview. I'm John Furrier, co-host of theCUBE here in the Silicon Valley, Palo Alto offices for theCUBE. I'm here with Peter Burris, head of research, SiliconANGLE Media and Wikibon team. We're here kicking off. What we're going to talk about at VMworld, what we expect to see at the event in Las Vegas and what are some of the highlights from the news? What's going to be discussed? Peter, great to see you. Great to be here, John. I know you've been working hard. We're going to talk about this new true private cloud report that you put out, very comprehensive, a lot to go through. So we're going to digest that. We're going to unpack that. But first, we're going to have theCUBE there for three days. Two sets, right? Two sets. It's the second year in a row. We have two sets at VMworld, 72 thought leaders and interviews in the middle of the hang space. So if you're going to go to VMworld, go to the hang space, look for us. Come say hello. There's little couch areas to hang out. Come visit us, say hello. Check in if you're an influencer. We're going to come preview some new technology we're going to show there. So don't forget to ask about that and take a look at the video clip and a variety of the tools we have with theCUBE digital tooling and video services. But most notably, there's going to be a lot of headline news. Andy Jassy is going to be giving a keynote. We got that confirmed on Twitter and a lot of discussion around the future of the data center, future of IT, certainly of how cloud and on-premises are going to intersect. This has been a groundbreaking report for Wikibon for the third year, the true private cloud report. So let's unpack that because I think this is a notable backdrop to VMworld is that, as everyone's been saying, hybrid cloud, now multi-cloud, essentially the same thing. The cloud is a great resource. On-premises is not going away. It used to be aspirational to have this notion of having cloud operations. Your report is now definitively saying it's no longer aspirational. It's actually happening. So take a minute to explain the report in its third year, some of the key findings. Well, we might want to step back a little bit and say what's going on. Because VMware's progress and both what it's enabling and what constraints it still faces are going to have a lot to do with what happens in the report. But speaking about the report specifically, true private cloud was a concept that David Foyer, Stu Miniman kind of devised a number of years ago. And the simple observation is that, ultimately, a lot of hardware vendors, a lot of system vendors were just taking the word cloud and slapping it on their hardware and saying, oh, here's our replacement strategy. Oh, does it have anything to do with cloud? Well, kind of, yeah, but not really. And their observation was increasingly customers were going to want that cloud experience. And the basic notion of true private cloud and what all of our research shows is that inevitably what's going to happen is that customers are not going to move their data to the public cloud on mass. There's going to be certainly some and important elements that are going to go there. There's no question about that. But that increasingly they're going to try to bring cloud, the cloud operating model, the cloud experience down to where the data resides. And that's going to be at the edge and that's going to be in what others call the core on premises and near premises. So side by side with public cloud players in a number of different hosting companies. So the very concept is the requirements or the attributes of the data are going to dictate where the workloads operate and increasingly those that's going to demand an on premises capability that still satisfies the basic notions of cloud. Great, that's good back travel. Let's not talk about VMware unless I have some things I want to talk about the true cloud report and get into that. VMware had it two, three years ago. Pat Gelson was under the gun. You know, the pressure, the Dell merger looming, what the future he's going to be in there. Since then the performance of VMware has been spectacular financial ease. He's really proud of that. Some new products pivoting. I want to get what you're hearing first but what I'm hearing is I want to give you something and get your chance to respond. I want to get your reaction. VMware has seen some acceleration over the years around vSphere, around kind of good stable. They haven't lost anything with vSphere. So one of their core products, virtualization storage but their larger counts are stable in the Fortune 500 losing some business maybe in the lower accounts but as the AWS, Azure and Google Cloud cloud native players are growing the emerging products are front and center for VMware. VSAN, NSX, obviously the driver which we want to double click on and then VCHS, the VMware cloud hybrid service. These are and specifically the VSAN getting momentum in these emerging products. How important is that for VMware? Obviously their stability is IT footprint but why is the cloud driving some of these new emerging behaviors? Look, every company wishes they have the install base that VMware has and that install base is predicated on VDI or video desktop integration, virtual desktop integration. It's VSAN which is the use of VMware as a basis for virtualizing storage and obviously all the stuff that's associated with virtualizing hardware. You know, John, it's interesting. If you think about what made the cloud possible certainly AWS took on the heavy duty, the heavy lifting associated with actually creating a business and it's obviously very successful but it all started with the idea of virtualization and the notion that you could in fact bring virtualization in on top of hardware resources and generate a lot of not only cost avoidance but also increasing flexibility so you can get better utilization but also increase your flexibility and that's one of the things that made the cloud possible and so if we think about the VMware install base it's that's where it all starts is the ability to get greater utilization and greater flexibility on premise and now it's moving into the cloud. So we got three basic questions for VMware that we're looking at. One, there's been a lot of chatter about the relationship between Dell EMC and VMware and what does that mean? Dell EMC is carrying a pretty significant at load these days and there's visibility in where it's going to go but VMware as a brand is worth an enormous amount of money. So how does Dell EMC better increasingly attach itself to VMware is an interesting question and what does that mean for the ecosystem? You mean having perversion senses possibly versus? Possibly, possibly but we want to get that there has to be a constant promise from VMware that they're going to take care of the ecosystem first with Dell EMC is a big participant in that. So that's the first thing especially these days with all the financial chatter. The second thing is this AWS agreement is really, really important and a lot of people are questioning is it a one-way street? Do you just, you know, sure we got virtualization in the cloud we have virtualization here doesn't make it easy to bring stuff up to VMware. What happens once it or up to AWS what happens once workloads get up there is AWS going to try to facilitate a migration. That's still a very, very challenging technical problem but we'll see a lot more Andy Jassy as a keynote as you said about how that partnership is working and where it's actually going because there will be a requirement also to be able to take workloads out of AWS and other public clouds and bring them down on premise. A two-way street that you look at. Got to be a two-way street, simple example. We're going to see increasing in the AI world we're going to see more modeling occur in the cloud more training occur in the cloud and more inferencing running out on the edge and in the core. Well, we want to see, you know, VMware certainly wants to see more of those workloads being virtualized and that leads to the third question. What's the VMware story with IoT with the edge? That is very, very unclear at this point in time and it's a lot of work is going to have to be required to put into it. And so I think that those are the three things that we're really focusing on and how does VMware answer those questions going to have a lot to do with future architectures, future business models and future partnerships. And it's important. I think the edge one is clearly obvious that they don't have much announced but they have to put a stake in the ground at some point. Absolutely. And you know, reality is the edge has real time often is associated with real time, high performance, heavy throughput, very lightweight execution. Use the cloud, use the data center. Use the cloud, use, you know, serverless computing as an example, containers, those things all don't require a virtualized machine. I want to get your reaction to something. I sent an email out to a bunch of buyers, friends in the network and the CUBE alumni and our networks and I asked them a question. I said, what do you think about VMware's prospects going forward as a buyer of technology as you're transforming your organization from the obvious on-premise operating model to hybrid and which they're all doing pretty much are agreeing to it. So the aspirational aspect was confirmed to your point. So they responded that I said, they said, look at VMware remains largely flat across server, infrastructure, storage and virtualization buying. In terms of growth? No, they're buying and growth. Growth, no, there's not really paying much attention to that. They're saying it's pretty flat. We're not going anywhere. It's not going down. It's not going up per se in the core segments. They said the main thing is going to be the emerging technology. So VSAN, NSX and VCHS. Then I asked them, I said, what do you like about VMware? What do you think they're strong in? They said, well, we'd like the fact that we have technology, if they can keep the technology lead, we're interested. So that's a question. Also, we'll get that in a second. The relationships that they've had with VMware and the supplier relationships, rich set of feature products and the compatibility with their existing IT footprint. I then asked them, what are you worried about? And they said, well, if there's a discussion about replacing VMware, it's around price costs and technology lag. Your reaction to those two points? First point is again, there's no question that VMware has a great install base of customers that are thinking about what it's going to mean. And I think the most important observation is that, and we'll learn more about how many enterprises really are starting to move their virtual machines up into AWS, for example, more at VMware next week. But I also think that it provides some cover for CIO or VP of infrastructure to say, yeah, I'm going to continue to invest here and I'm going to have the option of moving to something else. And there will be a lot more options for what do you do with VMware virtual machines in the future. Regarding the question of whether it's flat or not, I think one of the reasons why that perception is there is because the hardware business overall has been flat and VMware is a derivative play on the hardware business. So at least until recently, in many respects now it's dragging some of it forward because VMware allows you to put off additional hardware purchases. So we'll see where that cycle ends up. We might be at the nadir of that cycle, but I certainly think that we're seeing- It's mature for sure. It's mature, but it used to be that you'd buy new hardware and then you'd put VMware on top of it to virtualize it so you could get more productivity out of it. But as hardware slowed down, why would you buy more VMware? But I think what's happening now is people are thinking first in terms of buying VMware and what workloads they need to put on there, how they want to set those workloads up and then looking for hardware to do that and increasingly looking for the cloud. The third thing I'd say is that, look, the VMware Cloud Foundation and NSX are two incredibly important technologies. For example- Well, hold on, before you go there, I want to drill down on this because one of the things I mentioned in there is a keyword is existing IT footprint. This is a reality, some call it legacy. Having an IT footprint with VMware is not going to get you in trouble because of the path of the cloud, because you got cloud native, things like Kubernetes are down the road. But that footprint is the base foundation. So as NSX comes in and the cloud foundation, interesting new lever, how does those enabling components fit for the enterprise just sitting there saying, I got an existing IT footprint, I got all these clouds on the horizon, why NSX, why is the V cloud foundation important? Yeah, so let's start with VCF. VCF provides or is a, takes you maybe 75, 80% of the weight there to that cloud experience on-premises. A VMware based cloud experience on-premises. It's a really nice bundling of technology that provides a relatively simple way of deploying, configuring, maintaining, running and ultimately retiring workloads. So it's a nice package for a lot of enterprises that have that VMware experience. That's a different story from NSX. So on the cloud foundation standpoint, if you need to demonstrate to your board and to your CXO and to your line of business people that you are not just have an option to go to the cloud but you're actually bringing that experience more to the business, a lot of customers are kicking the tires on VCF and it's a good thing to do. NSX is a little bit different. NSX, if we think about the long term, there has always been a need to flatten networks in the enterprise. Having that network and that network and that network and trying to internet work them together through bridging and gateways is extremely problematic even at the network level. It requires- In terms of sprawl and complexity or both. In terms of complexity, in terms of the amount of processing, I mean the cost of doing address translation and taking packets and reformatting them for different workloads in the network, very, very difficult to do. Now you add programmability on top of that because at the end of the day, the cloud is effectively a network program model. Very, you know, you've got a big problem on your hands. Somebody at some point in time is going to make, is going to build a $50 billion company around the idea of internet working clouds. I don't know who it is. Cisco wants to do it. Cisco would like to do it, but Cisco, quite frankly, probably, you know, they could have started this process five or six years ago and they didn't get out there. VMware took some steps to do that. NSX is a pretty good candidate right now for thinking about how we build inter-networked multi-cloud environments. So you used the example before we came on camera to do this segment that the old world of network stacks, SNA, decknet, variety of other stacks, had proprietary things and bridges happened to your point, to your explanation. And then TCP, it became a flattened- Yeah, flattened them all out, made them all go away. So clouds aren't networks, but they're cloud environments, same concept, but flattening them out. Well, they really are networks. So throughout the day, they really are networks. They're network of machines. Yeah, they're a network of services, they're a network of machines. So explain the flattening piece. Are we still in the early stages of that? Are you seeing visibility? Very much so. What are some data points around this? And you said earlier that the multi-cloud and hybrid cloud are really the same. Well, today they are. We might envision a day when they're not. Here's why. Hybrid cloud is, I got this cloud, I got that cloud. It's more of a, where is the data located? Where am I going to run those environments together? Multi-cloud is I got multiple clouds that I have to internet work and I have to bring together. I want to run a job in one of the Oracle application clouds. It also touches some of the machine learning that you get out of Google Cloud and include some of the retail capabilities you get out of AWS. That is a very, very realistic scenario. It's going to happen. People are doing that kind of stuff right now. And that's the preferred outcome people are looking for. That's the preferred outcome that people are looking for. Well, each of those different environments are going to have an economic incentive to say, yeah, that's great, do that, but do bring more of the workload into my cloud. And because I'm going to create interfaces that are a little bit better at working together than you can get from the internet working side. Well, they'll still have to stay open. But some of those environments are going to be better at that than others. But at the end of the day, you want no penalty whatsoever from other than latency and where the data is located from amongst these different services. And so eventually what we're going to want to do is we're going to see the internet working itself flatten where the jobs, how the jobs are set up flatten, make it easier to move data and jobs or workloads out of one cloud and be able to put it in another because of any number of different reasons. And so that is competitive advantage, different economics, different product features. Regulatory regimes change. What happens if in Germany they decide to do something else from other than GDPR? What's it going to mean? So is NSX going to be that kind of connector, you think? NSX has the potential to be that kind of connector. So in enterprise, it's looking at how they can increase their set of options, their flexibility, their ability to bring networking closer to workload. NSX is as good that I know about, that we know about, as good an option out there. I want to ask you before we move on to the true private cloud versus private cloud and that whole report you did true private cloud third year. We're seeing a trend we're around the operating side of the personas that are developing. Google cloud next conference, the notion of an SRV site reliably with the engineer. Now public cloud has always been known as developer friendly, very developer oriented, cloud native, all developers love containers, Kubernetes and Istio knowledge, cool services are coming out. But now with VMware they kind of own the IT footprint from an operating model, operating the networks. The bridging of those two worlds are kind of coming together. Right now we don't see a lot of crossover yet between pure cloud native developers in VMware ecosystem. Your thought on that connection, those personas, how it relates to how the ecosystem is rolling out your thoughts. Yeah, you know John, I think that's going to be the big challenge for the next couple of years, literally in the next couple of years, that ultimately developers love the public cloud because they can avoid operations people. Increasingly the public cloud players are going to have to provide platforms. And everybody talks about infrastructure as a service versus pass as a service or platform as a service. But in Amazon, Google, Azure, Oracle, IBM software, all these guys are going to have to add capabilities that are that much more intriguing and interesting to developers. Bringing the enterprise developer into this ecosystem is the next big round of competition because those people aren't going to go away. They're too important to the future of business. And to the degree that VMware can provide, I think this is the best that they can do, a neutral platform for those guys as opposed to starting to introduce machine learning services on VMware or anything beyond some of the platform stuff that Dell EMC has, Pivotal and whatnot on VMware. Yeah, we can expect to see greater integration for that, but I think ultimately what VMware needs to be is a phenomenal target for stuff that's written over here that needs to run over there and have it run on VMware. I think that's ultimately what's going to happen. All right, Peter, great stuff. Now let's talk about the true private cloud reports. I think VMworld is always a beacon, it's always a bellwether for what's going on in IT with respect to on-premises private cloud or true private cloud or hybrid cloud, IBM as well as some others. And it's always, because they're always a leader in engineering. Before we get into the report, first describe the difference between what true private cloud is and what people have called private cloud. Because the term private cloud has been kicked around, going back, I think 2012, I first heard. Oh, private cloud, I first heard the term private cloud, probably 2005, 2006. But you guys have nailed this definition called true private cloud. What does it mean, what's the difference? So the idea is the cloud experience wherever the data requires it and increasingly data is going to require it at the edge in the core, in the data center, local to the business. Because of latency issues, because of cost of bandwidth issues, because of regulatory issues, because of IP control issues, any number of other issues, there's going to be an increasing distribution of data. Workloads are going to follow that distribution of data and the systems have to be there to run it. But we want to have a common vision of how those workloads are operated and a common model for how we pay to run those workloads. So when you think about true private cloud, it's basically, we want the cloud experience, which includes the simplicity, the one throat to choke, the regular and non-invasive upgrades and enhancements to software. We want to add to it kind of the management interfaces that we're associating with the cloud, but also the pay as you go and the flexibility to scale up and the greater plasticity to be able to add services. We want all of that, but in a footprint on premise. And that's what true private cloud. And that's what we mean by true private cloud. Now, if you go back a few years, companies would, you know, you get a hardware company that say, oh, look, cloud is Linux, plus some management control interfaces. No problem, we can put that directly in our operating system or have a management interface on our platform. Now we can call it cloud. And put in your data center. And put in your data center, but you still pay for everything upfront. You have to deal with software patches and upgrades because it's software that can solve. So it's operating model, how you consume technology, buying it. Operating technology, the flexibility and the future of the modern application approach, which is services oriented and networks of data. And so one of the findings, obviously, you're pretty strong on this saying this is no longer aspirational, it's realistic. What does the report show? What are the numbers? How did you break down the report? What are the categories? And what are some of the data? So the aspirational notion was that we kept talking about true private cloud, but the hardware vendors were slow to actually deliver on it, especially on that service oriented approach as opposed to a product oriented approach. But I don't mean product approaches. You buy it all upfront and it's caveat up during the consumer. Service oriented approaches. We have enough belief in what we're selling that you're only paying for the service that you consume, which is what AWS and Azure and others do. So we're seeing that actually happen. That's number one. You take a look at what HPE is doing with a technology called GreenLake. IBM is advancing its cause with software. Dell EMC is doing some interesting things with both VMware, but also some related types of technologies. All that is happening right now. So the server companies or traditional server companies are introducing true and honest goodness capabilities that mimic the cloud. So that's happening. The second thing that's happening is the AWS is the Google Clouds and the big hyperscalers are also starting to introduce technology that allows at least elements of their platform to run on premise. The big holdover was AWS. But now through Snowballs, their kind of rent a box, data box, you can now put a fair amount of processing on there and a fair amount of AWS stuff and you can actually run workloads down on this box. So it extends the AWS platform out to locations in a very novel way. So we're seeing, on the one hand, the server companies truly introduce technology and services that actually do a better job of mimicking the cloud. We're seeing the cloud players come up with technologies that allow them to extend their footprint, their cloud presence down to where data needs to reside. And that's where everybody's going right now. Everybody's going for that spot in the marketplace. So you have categories here on premise. We have on premise, which is kind of the traditional true private cloud and the leaders from a hardware packaging standpoint are Dell EMC, HPE, or two of the big leaders. Then we have Cisco's right behind them. Cisco's right behind them. We've got what we call the near premise or the hosted true private cloud. And this is where you have AWS right next to your private cloud box so that they can communicate really fast or it's hosted. IBM is very big here, but there's a number of other players. IBM's got a sizable lead. It's 12% by your numbers and Rackspace coming in second. Rackspace is good. And then you've got some very interesting and very important smaller players like Expedient, for example. So there's two main categories. It's hosted and then on premise. On premise. And then there's another category. So near premise and on premise. And then there's the ecosystem side. There's a software that's actually utilized to do this. This is where VMware is. Explain what that ecosystem is. So you call it true private cloud, ecosystem pull through shares. What is that? So VMware, as we've been talking about, is one of those technologies that allows one to devise a true private cloud platform. Increasingly, that's what they're doing with some of the technologies we've been talking about. And so ultimately they are putting the software out to customers and customers are defaulting to that software as their approach to building a true private cloud and then pulling hardware through as a second decision. So the first decision is I'm going to build my cloud, my private cloud, my true private cloud with VMware and I'll find hardware that doesn't get built. So it's leaders who are pulling hardware sales. It's the software leaders that are putting the software for building true private clouds out there and then through partnerships, dragging hardware in. And so they're in there, everyone wants to talk to them. So that's VMware, 24%. Nutanix is moving along, HP, Microsoft, IBM, interesting. That's awesome. And any other findings that you've found in terms of growth and number of size, I think this year you had a 21 billion roughly, 2017. Yeah, it's just over 20, it's like 20.3 billion. It's going to go to over 260 billion in 10 years. It's going to be bigger than the infrastructure and there's a service marketplace. It is the true private cloud segment, the on-premise segment for the first time, exceeded the size of the near-premise segment as the software matures and as we figure out how to make these business models go. But this is going to be, you know, Diane Greene said something very, very interesting at Google Next and she said, look, nobody really understands how this business is going to work in 10 years. And she's right. Some companies clearly have a better understanding. So do you think your numbers are short or over? I think- That implies that you don't- Well, no, no, I don't know whether it's short or over, but let me give you an example. That our numbers presume a relatively constant approach to thinking about how we price and generate exchange for this stuff. But how fast the cloud operating model that pay-as-you-go moves into the true private space is going to have an enormous implication on what those revenues look like. The degree to which companies demand a three-year commitment like Salesforce starting to do with SaaS is going to have an enormous implication on how those revenues actually get realized. Well, we debated, you and I have debated this before with Dave as well. Dave thinks it's a trillion, Dave Vellante. So, you know, I think you're sure. I think you took a conservative approach on, you know, just my personal observation. Well, I think the overall cloud market's going to be, if we add SaaS in there, it's going to be 260, 300, probably a total of 700 billion, something like that. So it's pretty sizable. So we're just talking about that on-premise cloud. Yeah, the true private cloud, you know, 250 billion dollars by 2027. Okay, so I got to ask you a question. Since I liked that Diane Green quote, by the way, I was just kidding you about the forecast numbers, but I think she's right. So I got to ask you, what is your observation around what this report says vis-a-vis the buyer market out there who are squinting through the FUD and all these rankings around who's got the most market share. We hear, you know, there was a post on Forbes from my friend, Bob Evans, that said, oh, Microsoft's number one in cloud. So how you define cloud as a function of, how you define cloud, someone defines it by bundling in office and apps and eventually the level of granularity is going to have to be at least segmented a bit. How do you view how customers should keep a scorecard for market share, leadership? You know, besides customers with number of services, I mean, is there a approach to anything coming out of this data that you would see in saying maybe the market might want to be sized this way. Maybe you should be thinking about not so much market share numbers and some graph on some analyst firm. Is there any thoughts on that? Because it's a big thing. In true private cloud, just one sector. You got SaaS and you got past. So I think, John, there've been at least, and we could probably say there are more, but just making it up off the top of my head, there've been at least three eras that users focused on. Eras number one is the hardware as the asset. How do we get the most out of our hardware? And that dominated and probably until the late 80s or so. And then it became the application as the asset. And then we bought to the application, we bought hardware and all the other stuff underneath that application. And that was pretty much 2000s up until maybe 2010. And now we're thinking of data as the asset. And what does that mean? What it means is that ultimately, I think that the way that, we think that the way that architecture is going to be thought of is not around application architecture, but around data architecture. And I don't mean data architecture like a DBA. I mean, what is your brand promise? What activities do you have to deliver to deliver that brand promise? What data and services do you need to perform those activities? Get that data in as close as you possibly can to those activities wherever they have to be performed so that you can perform them predictably reliably at the lowest cost and in the shortest period of time. So I would start with the idea of, you know what, I'm going to focus on where my data's going to be located to run my business. That's where I would focus. The second thing, as I think, when we think about market shares and when we think about a lot of these other questions, it's okay, which, this is a transformative period of time. Which of these companies is going to be most likely to deliver product to me now, but also have create better options for how I do stuff in the future. And we like to talk to our clients about the idea by the stuff that provides the best portfolio of options on future data value. And so data today to help me think about architecture, work with companies that are demonstrating that they're going to be able to create the options that you need in the future. Because this is going to change a lot over the next five, six, eight years. And so you want to work with companies that are demonstrating that they're able to create new technology that they're, you know, through IP, through things like open source or sharing it. So who's number one? Again, I don't think there's going to be one score. I think it's going to be level of services. How many services are you using? That was one angle I wanted to do, but I can't, I'm still having a hard time, but I guess I'll actually put you on the spot. If I'm a customer, Peter, who's the number one in cloud? Give me the top three players. AWS, Azure and Google. Okay, there you go. The top three clouds. Well, we're going to keep an eye on it. Let's go to four though. So AWS, Azure, Google. And again, from that true private cloud. Because that's, no, it's got to be VMware. Because that's where the pull through is right now, right? But when you think about it, the big question is, is AWS and Google Cloud going to come down to the edge and down to the true private cloud as fast as some of these other cloud players are going to go up to the bigger cloud. If I were to pick the one that's most likely to win, it's located somewhere near Redmond. Yeah. So Microsoft or in Seattle area, AWS. Again, again, it's so early. I think if people are going to have to figure out what to do, that's going to determine the winners and losers. Surely a true private cloud report, great report. Check out the true private cloud report from wikibon.com. Go to wikibon.com and check it out. Preview for VMworld. I'm John Furrier, Peter Burge. A lot of exciting news. Two large sets, 72 interviews, three days. Come visit the CUBE team. We've got a full team down there. We're going to have a lot of our teams down there looking to talk to you, join our community, join our network. We're going to have a lot of fun. Also, I've learned a lot at VMworld. Talk to some really smart people. Thanks for watching.