 Live from San Francisco, California, it's theCUBE at VMworld 2014, brought to you by VMware, Cisco, EMC, HP, and Nutanix. Now here are your hosts, John Furrier and Dave Vellante. Okay, welcome back everyone here live in San Francisco, California for VMworld 2014. This is theCUBE, our fifth year at VMworld, Dave Vellante and myself, my co-host, a really, really great event. Certainly all the innovations happening here within the enterprise. Our next guest is a disruptor of that enterprise creating value, D. Raj Pandey, CEO of Nutanix, one of the hottest companies here in VMworld. We just had the CEO of Docker on on the app side. Nutanix, certainly getting all the ink these days in terms of success and also with EVO Rails highlights this new model. Congratulations and welcome back to theCUBE. Thank you, thank you. This is my third time to theCUBE and fourth time probably. Yes, theCUBE alumni, we love having you on because your experience, you've been through many in a patient cycles, you've seen them come and go and this one is really different. It's got a big inflection point happening very fast. And so I just want to get some quick things out of the way. You guys just announced this morning $140 million of fat financing at a $2 billion valuation. Congratulations. Thank you. Was it a hard sell or were they like lining up to hand their cash over to you? Yeah, I mean this time around we've said we got to just go and build a relationship with the best investors who will buy into the IPO as well. And it was about the character of the investors more so than just trying to get another 10% better valuation or something, you know. I said you let the East Coast guys in. So thank you for that. Yeah, absolutely. It was good to get a little love to the East Coast. They need some help over there because it's all the action is. I hate to say it, it's true. Yeah, Boston has character. They're long investors and they actually want to go and build a long-term disruptor as well, you know. We had a big conversation with Greylock, NEA when they were on here, Steve Herrod at General Catalyst and also Frank Artali, all VCs. This pre-IPO financing trend is huge. It's like a pre-IPO IPO where there's a lot of action going on. I mean, that's a lot of cash you raise. You could probably raise more. I think it's the headline we're going to run with the Silicon angle. That's good cash. That's like an IPO. So everyone's kind of getting liquid. So I got to ask you the question, did the employees sell? Did the first stock sell mean Cloudera? They had liquidity from the investors on their kind of pre-IPO liquidity. Talk about the liquidity, did you guys sell? No, none of us sold actually. In fact, none of the existing investors sold and none of the founders or commoners actually sold. This was, I mean, people believe in this company. No one sold. No common, no preferred, no one sold. Yeah, Common just added more and said, you know what, sorry, could the company just added more? Hot deal though, you could have structured it that way, I presume, he shows not to. Yeah, I think, you know, there's a, I mean, I talk about this in my blog which I wrote today as well. It's titled, The Baton is Passing. And I talk about what it really means to build a large business and how we are scratching the surface of it actually. So what people think of us today is basically boxing us in with a category like hyper-converged and, you know, converged infrastructure and so on. But what we're really building is a company that's much bigger than that actually. Yeah, now we've had previous CUBE conversations where we talk about how to build a company versus a quick flip and you guys, hats off to you guys, congratulations. I know it's been a hard road. It looks easy from the outside when you get all the financing. But I got to ask you about the hard part now which is, you know, sustaining the performance. You're on a $200 million run rate. You have Docker out there, fully Dockerizing on the app level. Certainly developers are buying into their model. Love containerization. It's got an open source with a twist. The more you contribute, the better the platform ecosystem gets. But the whole idea is a shield infrastructure from developers. So you're on the other side. So how do you guys look at that? Are you guys the other side making Docker easier? Can you explain your role in that trend? Sure. I mean, you know, if you look at two years ago, three years ago, AWS was the hottest trend for developers. And now it's in the private cloud. What can Docker do for you or something? And then we were looking at AWS. We said, you know, we've got to integrate AWS with the rest of the infrastructure, the rest of virtualization that people, IT does actually. And it's about seamlessly integrating everything together. I think if people want self-service apps with Docker, they'll need self-service ways to debug performance issues, debug faults, and things like that. So there's a lot of analytics that needs to be done on top of that stuff. I mean, Docker is an orchestrator. You can go and do provision. You can figure out a way to box things up together and move things around as a container. But at the end of it all, once you've provisioned it, now what? I mean, once the app has taken a life of its own, there is a lot of hand-holding to really figure out why it's running slow. Does it need to move? There's a ton of analytics to be done on top of that. So provisioning used to be a hard thing, but now it's almost table stakes. Look, I had provision easily stand-up infrastructure, load apps with the container, whatnot. So provisioning, check the box, innovation's done. But now with the lifecycle of apps in a dynamic environment, you need policy, you got to be programmable. What does that do for the infrastructure? So is it a big data problem? Is it the software stack? What's the enabler for the developer not to worry that the infrastructure's going to break? And how do they do policy? I mean, you know, I give an analogy like, software-defined data centers still need silicon to run. So you can't get rid of hardware simply because software-defined data centers are software-defined. Similarly, when you actually decouple the app from the infrastructure, you still have to live with infrastructure because an app will not just run in a vacuum, right? So those integration points, those touch points are exactly what Nutanix will bring to the table. Like, you know, you look at this new way of sandboxing something. How do you actually go and meld it with the rest of the infrastructure? You know, starting with configuration management and policies because Docker provides a good mechanism, but how do you really put policies on top of it so that it's about security and performance and monitoring and fault analysis and things like that? So there's a lot of big data to be done on top of it. So everybody's talking about sort of hyper-conversed the show. Steve Herrod said, well, it's interesting. On the one hand, it's confirmation for guys like you. On the other hand, everybody's starting to wonder, okay, what does this all mean? What does it all mean? Is VMware essentially taking a Larry Ellison type of approach, trying to create through an ecosystem, sort of an integrated system? What does it mean for you guys? How should we be thinking about Evo Rails? Yeah, I mean, to us, it's about end of the sand. You know, it's like when VMware starts talking about hyper-converged and the array vendors start blogging about where you need hyper-converged, where you can't have hyper-converged, it actually is a problem for them. Because now, exactly. So now when a big company like VMware starts talking about no need for a sand, I think it's actually a bigger trouble for the arrays. And I mean, I talk about this in another metaphor, talking about when Android and iPhone collided, they were competing, but the thing that they were really kind of sucking out the life out of was a PC. And that's what's going to happen with hyper-convergence. We all visually look to be kind of colliding with VMware, like, oh, Evo Rails is going to be death to Nutanix and so on. But the first thing that will die is the sand. And that is what's going to be common about what we do and what VMware does. I mean, the more power we provide to the application guy, the virtualization guys, the more we can do top-down selling of storage, which is very tightly coupled with applications, I think the more power it will give to this market as well. So you're saying it's okay to be the Android or the iPhone, just don't want to be the X86 desktop. Yeah, absolutely. Talk about your company, we were talking off camera and you told us that your organization is a little bit more transparent than most sort of startups and small companies. So share with us some performance metrics, you guys, whether it's headcount, can you share with us revenue run rate, customers, you know. Yeah, so it's one of the things that we actually do really well, not just on the outside, but also in the inside. We talk about that with our partners like Dell, for example, we have the city of Dell sitting here, Sam, and we are very comfortable with Dell actually carrying an EVO rail kind of platform and also carrying a Nutanix, because eventually the dust will settle and the true character of technologies and products will come out. And if you're not a good enough product, then we don't deserve to be actually being talked about at all. So this is a marathon and we talk about that with Dell like that as well. So that's how we talk to partners, we talk to our employees about things like dilution and things like outstanding shares and stuff like that. To the rest of the world, we actually talk about the business, you know, like everybody is like, no, we are a private company, we can't really talk about numbers. We go and talk numbers as well. Now someday it'll actually come to a little bit more guarded communication because of SEC and stuff like that. But until the time, we won't let the lawyers actually run this company. It sounds like Sergey and Larry like Google when they went public, they wanted to do things differently. You guys got that same vibe there? Like, hey, you want to run away? Yeah, and customers love it because when they see the size of the business, when they understand that we're open about revenue, open about number of customers, average deal sizes, repeat business, all the stuff. I mean, NPS scores. I mean, we are one of the rare few companies that really talk about NPS scores and customer sat and things like that. Because we're proud of those things actually, you know, and there's nothing, in fact, if there's something that we can't talk about, that must be something weak about us. And even that is out in the open. I mean, the Nutanix Bible, as a case in point, is a website that is maintained by one of our architects. And it's one of the most heavily hit Nutanix assets. And it has every strength, every weakness of Nutanix technology. And we know that only with that kind of a transparency, we can actually be a better product, better company. So flex some muscle a little bit for us. Actually the financing speaks for itself in terms of the bubble and the hype and everything, but that's validation. You have revenue, run rate. How many customers do you have? How many customers over a million dollars do you have in the company? Sure. We actually talked about this in our press release about 15, 20 days ago. But as of July 31st, we had about 800 customers. We're adding about 200, 250 logos a quarter. And we have a lot of repeat customers. So about 70% of our customers actually come back and buy two times more in the first 12 months. And this has resulted in about 29 to 30 million plus dollar customers for us. So give us your take on VM where we had Pat Gelsinger around talking about getting an offensive strategy. You're obviously a ship that's out there getting stronger and bigger, floating out in the waters. Eventually, right now I'm not in here VM wearing the Ecos as of for sure. What's your future look like relative to some of the other players? If you continue to go on this pace, it starts to get competitive. How does it go? I saw Cisco's booth up there. It was a pretty big booth. And Cisco and VMware have coexisted. Now it's going to be conceded of me to even compare Nutanix to what Cisco is and what Cisco, VMware look like. But I think good companies know how to coexist. I mean, just because Angela Merkel is talking to, Putin doesn't mean that she's not a friend of the US or something, right? So I think just like geopolitics, this is the geopolitical environment that you see in the VM world here. And I think good companies know what it means to really put partitions and boundaries and still be respectful of each other. Well, it's a growth market. Growth cures all problems. When it starts to get slower, maybe, but right now we're in a massive growth phase. And I think the way I look at what VMware is doing is, as I just told Dave about it, that it's the beginning of the end of the sand. And that's what we will rejoice together because the enemy here is- What do you mean by that? That's a good point. Would you describe why that's happening? Well, the big reason for that is empowerment and liberation. So if you go back to the days of NetApp, it was selling empowerment and liberation to the line of business per single. Here is a really easy, fast-to-deploy appliance that will give you liberty over corporate IT so you don't have to beg, borrow, and steal, block storage or something. And it's sold like hotcakes. You know, then came VMware and said, look guys, you don't have to wait for budgets. You can really start going and doing things like test and dev and pilots and things like that without really worrying about getting more servers. Microsoft did this in a big way with respect to the other Unix vendors and with respect to systems management and so on. Liberation sells a lot. So when we go and go and- Especially when it makes money for the customers. Absolutely. Because, you know, there are different words for it. It's time to value, speed to market. But the real way to explain all of this phenomenon is human beings want empowerment, you know. And hyperconvergence empowers the application user, empowers the virtualization user. The folks who really consume storage are the guys who actually end up buying it. So I think that's a big phenomenon and it's more tied to the right brain of humans as opposed to left brain. It's not speeds and feeds. It's more about I can make my own decisions. I don't have to beg and borrow storage from a server. There are technical tailwinds too, right? I mean, you saw Function move out of the server and offload the CPU for good reason. And then this whole infrastructure built up around it. But it's clearly moving back. Oh yeah, absolutely. And I think- Cores, you know, cheaper memories, flash. I mean, there's three things that we look at. One is virtualization became mature. So you can now run any and every app, not just the business app, but storage of an app, for example, can now run inside a hypervisor. 10 gigabit ethernet could now converge networks. So you don't need a separate front plane and a separate back plane. You could converge them and use software-defined techniques to really still keep them separate. And lastly, the advent of flash. I mean, there's so much silicon on the server that it can get hundreds of thousands of IOPS without really having to worry about going to an array itself. So you're- I wonder if I could talk a little bit about the TAM. Some of the trade press pickup this morning said, you got the potential to become the next Oracle. Now, of course, one of your investors perpetuated that. But nonetheless, the market's enormous for you guys, we have pegged it of TAM of about 400 million, which it is, if you add up all the storage and server- For a billion, I mean? And networking, 400 billion, sorry, did I say million? 400 billion, yeah, so enormous. So how should we be thinking about your approach to attacking that TAM? You've got everybody talking about the same benefits of converged. You throw in the word hyperconverged. So help us understand the real difference and why you can continue to grow faster than some of the legacy guys. So, you know, TAM is historically a very lagging indicator of anything, you know? If you look at analyst reports, talking about ServiceNow, for example. Ah, absolutely, good example. Analysts still think that the- Eight billion. ITSM market is actually, in fact, ServiceNow is only a billion and a half dollar TAM or something. Yeah, right, right, right. And you know what? I would take that any day than having to go and please an analyst to say, look, the TAM is really big. Rather go and have my sales force go and do the talking and say, well, you guys will know over time what the TAM really is. So I think the space that we are in, the TAM is growing every year. It's all about workloads and use cases. If you keep expanding the scope of applications and the use cases and the workloads, all the TAM will come to us. And that's the way we look at it. I mean, it's about platforms. So, you know, going after OEM model, for example, grows our TAM because we can be everywhere Dell is. So there are places where we'll have to go and do what Dell does, for example. And still be the piece of software. Because the place when you start to limit the TAM of any company, when you start to have religion, this is the one and only way you actually do things. Like, sun did this to itself. And when it saw x86 actually ramping up, they're like, oh, it's a toy. We actually are serious guys. We actually go and do big applications. Let the toy actually go and run. Can also kind of made that mistake too. Yeah, exactly, exactly. Free role guys in the audience. So the point is, you know, you keep growing the TAM by disrupting yourself. By doing an OEM deal with Dell, we sort of disrupted ourselves. But then we also said, if we don't disrupt ourselves and someone else will, right? And that has massively grown the TAM of this company. Now we go after new workloads. We're going after, you know, exchange workloads and Microsoft and Oracle and all that stuff, you know. We'll go after no SQL workloads relatively soon. I think there's all that stuff around workload expansion is what TAM really means. So help us understand why you guys are different. Because everybody's using the same words, same marketing messages. What makes Nutanix different? I blogged about this today as well. So it's fresh in my mind. I think the two things that we do, I mean, and this is on the product side, you know. Obviously there's more on the business side that I think we do okay and can do even better over time. Execution stuff you're talking about. Yeah, so on the product side, the two things that we've done well and have passion for is consumer grade design and web skill engineering. So, you know, you get the right brain of Apple and the left brain of Google. Can you meld these two together and bring it to the enterprise, actually. And we are a very well-balanced company at that. You know, we have tons of people who just think about design, design, design. There's tons of people who think about how do you make it scalable and available and reliable. So on the product side, we actually do a pretty good job of that. Now on the execution side, you know, we have our VP of support and ops sitting here. David Sanxter, we really own support. We absolutely own support, better than most companies ever can. And if there's an escalation or two or whatever, I think all of us are equally involved in that. NPS scores are pretty big. I mean, when we lead with Nutanix story, we talk about the product and technology, but we also talk about support. And together, they actually become a really good combination. I talked to a couple of customers this week. One was the CIO of San Mateo County and the other one was from Australia. I forget it was Langs maybe. Langs maybe, yeah. And both of them sort of underscored that. So, you know, props to being a partner and not just that. And I think on the internal, I think, you know, we at least strive to value employees and value customers and value partners. I think if we have empathy for these stakeholders, I think eventually things work out. I mean, a lot of companies start to go the other way when they start to just empathize stockholders and not the other stakeholders, like employees and customers and partners. And that's when things start to go wrong. I want to ask you about the culture around the company, obviously, and how it relates to some of the trends. You mentioned that people are aware and transparent. And fear of being paranoid as Andy Grove would say. It sounds like a little bit of Andy Grove mentality here. So, with that in mind, I got to ask you, you guys were one of those companies that no one understood, you know, the misfit toys at the beginning of the financing journey. What is this new ton? It's will it work? And you know, I've talked about that now. Obviously, the success is proven and everyone's trying to be like you. In an era of automation, orchestration, things go away, jobs go away, things are displaced, they're automated and the shift goes to other places. So where do you see the shifting happening? If the software stack continues, if the DevOps continues to happen, the containerization, some of the intelligence around analytics, where does the shift go to? Where will the innovation happen that's unique, that's not yet seen by people? What's your vision? Is it going to be security, other problems? I mean, no one really gets fired, they just shift to other places. Yeah, you know, phones were also an invention for the longest time. For decades, we kept tweaking on phones, became cordless and you had these big satellite phones and then 3G arrived in the scene and people started talking about smart phones and so on. So anything that we use on a day-to-day basis will continue to get better. Today we have tons of people in a data center. Tomorrow we won't have as many people in data center because you use big data techniques and machine learning and artificial intelligence to do more and more. Managing volumes, the little thing, administrating stuff. Those things you take away, I think you know, as a company we believe that storage should become an invisible resource in the data center and how do you take that away? But the way we're approaching this whole thing where humans are less and less involved with machines is a very humane approach around education and enablement because the same people can now do better things. Like the storage guys can uplift themselves to do more application work, more virtualization work, more hybrid computing work and so on. So Nutanix is a massive investment in education. It's a pretty big part of our overall, I would say, initiative. It's not just product and technology and support. What can we do to uplift and elevate the lives of people who jobs might be taking away today? Where do you see some of the early signs there in terms of job shifting and job retraining? Is it the DBA moving over to something else? Is it big data? I mean, what early indicators can you point to now that's saying this is actually happening now? People are moving and shifting. Well, you just look at the v-center plugins around storage and networking and you know that there is a convergence of responsibilities going on right now. I mean, the big fight between Cisco and VMware is about who owns networking because East-West is like, okay, VMware says we own it and North-South is like Cisco is like, well, we actually own it. So until you have the North-South, you can get East-West to work together. How about that statement by Pat? We love Cisco gear, kind of a little T-positioning there. Oh, it's kind of interesting. Yeah, so I think I mean, both are equally important. Well, that's a gear company. But you know, coming back to your question on how the responsibilities and the roles are actually converging, I think that's a pretty good indication of where things are going now. D Raj, always great to have you in theCUBE. It's a pleasure to talk with you. I mean, you've had such a great success and you really built a great company. Congratulations. I think this is the beginning. Great to hear the stories and the insight around the success of new Thomas. And again, congratulations. Great to follow you guys. This is theCUBE live in San Francisco. We'll be right back with our next guest after this short break.