 Live from the Mendeley Bay Convention Center in Las Vegas. It's theCUBE, covering VMworld 2016. Brought to you by VMware and its ecosystem sponsors. Al, here are your hosts, John Furrier and Stu Miniman. Okay, welcome back everyone. We are here live in Las Vegas for VMworld 2016 at the Mendeley Bay Convention Center. We're in the hang space where theCUBE is located. I'm John Furrier with Stu Miniman. We're here with Chad Sacacusti, president of EMC's Converged Platform Division, formerly known as VCE. Welcome back. Great to see you, Bispump. Dude, it's good to see you. Seven years we've been doing theCUBE. You've been on it every single year. I can't believe it. We love you having you on. So look, theCUBE has become a fixture of VMworld for me. Seeing you guys, you're good looking faces and puts a smile on my face. But I can't believe it's been seven years. That's insane. Yeah, the seven year inches they say at VMworld. So I got to ask you, you're always candid and colorful, but you've seen the transition. You've been in the trenches coding. Now you're a president of a division, big division doing great. It's terrifying, isn't it? It's interesting. The cube is bigger. We're all getting bigger. What's your take right now? You've seen the journey seven years. Where are we? So look, VMworld has always had a huge community. One of the things that's been defining about VMware's whole journey has been the community. And that's one thing that stayed pretty constant, right? There's a lot of people here, this time in Vegas, previously in San Fran, they share a passion and a love for all things that VMware's doing. That said, it's a very different show. It's a very different context. It's a very different ecosystem. Like, literally at the beginning it was one product, right? You know, now if you look at the keynotes, they have to struggle to get all of the awesome into an hour and a half and do it in two days, right? And they can only hit certain highlights. I mean, so Sanjay did a great job today. Kit did a great job. My favorite, Yan Bing. Yan Bing Lee has got passion, energy, and loves her baby V-san. But imagine trying to cram all that stuff in previously in years past, if you go back seven years, that would have been all of VMworld would have just been on one thing, right? And then obviously the other thing that's going on is the entire ecosystem has changed, right? So we're seeing consolidation in the ecosystem. But we're also seeing, I think Pat actually did the best job I've ever seen of that realistic balance of what's happening in traditional IT, private, public, hybrid cloud models, and how that's going to play out over the next few years. But there's no question that public clouds are a huge part of the landscape for here, for now, for tomorrow, and forever. You know, Pat got some criticism on Twitter. I saw some blog posts out there said that the keynote was a snoozer. But it was straight talking. That's what the ecosystem wants from what we're hearing. Stu might have his own video on this, but what I'm hearing is, I want to see the path. I want to see what VMworld is going to be going so I can get behind that train, clarify, show me the straight narrow roadway so I can turn up the gas a little bit. So, you know, there's the expression that basically says customers always right, or the people are always right, you can trust the people. Sometimes the customer is wrong, and sometimes the people are wrong. So last year they went bananas over V-motioning a VM between two clouds, because it plays to the base. It plays to the audience that are like, I love V-motion, why wouldn't V-motion between clouds make sense? The reality of it is, is that while that was cool and technically accurate, this year's demonstration of basically saying, no, you're not going to V-motion VMs between on-prem and public clouds very often, if at all, but you will need to be able to do things that bridge public clouds is actually a much more correct and relevant answer for the market. Now the difficulty is that sometimes you're telling people things before they're ready to fully internalize it. It's shock to the system almost, really. So you play to the base, it's a lot like politics in that way, but I got to ask you the question, you've been- By the way, just like in politics, if you constantly play to the base, you never move forward. Yeah, and this has always been a diverse ecosystem. So let's start with the cloud thing. So obviously, ecosystem's back on the table, I'd say. It's front and center, it's always been front and center, but as it consolidates, we're seeing a straight path. The question that people want to know is, will everyone have fair access to VMware as an independent company? Visa V, the new big mega merger was announced by Michael Dell just minutes ago, that September 7th will be the close date. What are you talking about? Dell Technologies. What? It's official chat, you can talk about it, Dell announced it, Michael tweeted about it. You're not baiting, switching, show his tweets, if you want. Chat said- I'm joking, I'm joking, and by the way, I'm so pumped and so excited. Frankly, I think not everybody understands exactly what's going on inside the industry. The server storage and networking ecosystems as stand-alones are actually shrinking as workloads move to SaaS, as workloads move to public cloud. I ask the parts of the ecosystem that are growing are customers that are basically saying I want converged, hyper-converged, and turnkey software stacks, and that's the way that they want to consume because they want to simplify stuff down. To be able to pull that off, you have to have all the ingredients inside the stack. Increasingly, you will not be able to be competitive without having all of those components in the stack, and this is why I'm passionate that convergence, hyper-convergence, and convergence, and also turnkey software stacks, will be at the center of Dell Technologies. And I keep telling Michael and he keeps agreeing, which is a good thing, right? Now, the reality of it is that we cannot, in spite of that statement being true, it is also true that people will continue to want variability. That may be a declining set, but it's a bigger set of customers than the customers are like, I'm all in on turnkey. So this one's smaller, but growing faster. This one's a much bigger ecosystem of, I'll mix and match whatever I want and put it together. So if you look at Yan Bing's session, so she said HP with VSAN, then she went VXRail and Yan Bing, thanks for the shout out during the session, that was awesome. That we're powering basically some great events with dye data and powerful things in small packages, that's a highly integrated system. And then they brought up a customer that was totally building it themselves, right? So literally in the span of two minutes, you had the continuum of build it yourself, a turnkey thing, build it yourself. So will it be sustained? Yeah. Can you expect that we are going to lean in like crazy on our integrated stack? Yeah. But will we do it in exclusion of all the people? It's not mutually exclusive, they're just different use cases. Yeah, so look, VXRail is winning in the marketplace because it's a highly opinionated vSphere HCI-A. If you don't have vSphere, you don't like VMware, it's not the HCI-A for you. Right? However, more customers say yes than they say no and that's awesome. But we know that we're going to need to create a next-generation version of the Microsoft Azure Stack on-prem HCI-A. It won't be built by the VXRail team, but their customers want it that way. And we're not talking about a lot this week, but last week we launched VXRack Neutrino, which is a turnkey open-stack KVM Susie-based thing. Choice, baby. Yeah. And Chad, first of all, the Dell deal's announced, so this is the final nail in the coffin of VCE, correct? Absolutely, of course not. So look, the reason that we are shifting the way we talk about VCE is something really simple. If I say VCE, what's the first thing that appears in your brain? V block. V block. And that's a good thing in a sense. Yeah, how much revenue did you do last year, Chad? V plus 3.5 plus billion dollars, almost entirely in V block and VX block. That'd be a nice public company on its own. On its own, right? And growing at 40% cumulative annual growth rates. Like, that is amazing, right? And by the way, the thing that's interesting is that hasn't slowed down one iota in spite of the fact that everyone knows that the Dell deal is going to close. However, the difficulty it is, is that we are now no longer just the V block group. We have these hyper-converged appliances that are growing like sink and customers are voting with their feet and their dollars. And I think in a short amount of time we'll be the number one by customer, by revenue, HCI player in the market. But furthermore, we also do these turnkey cloud stacks. So realistically, VCE is more of a product brand than it is a company brand. And we are no longer a separate company. We're part of EMC and on the seventh, we'll be part of Dell EMC. So, Chad, can you help us connect the dots? You've got the verge infrastructure, the platform. You've got some solutions team. Talked about SaaS and public cloud. How does Dell, EMC, VMware stay relevant going forward and play a part in that whole story? So, it's a great question. I'm going to try and see if I can do this in an uncharacteristically concise way. Do you believe that hybrid cloud models will win? Sure. Do you really believe it? I mean, what we have today isn't really good hybrid cloud, but that's where we need to go. So, by the way, we need to make the on-premise clouds as simple and easy to consume in utilitized modes as the public clouds are. Love that. Right? However, I think that it is inherent that economics, governance, data gravity will always balance out some workloads biasing towards public, some biasing towards private. Furthermore, do you think that there will be one cloud model that will win? Will it all be the VMware SDDC cloud? Will it all be Azure? Will it all be Amazon? Will it all be cloud foundry? Will it all be soft layer? Well, Andy Jassy has an answer for you, but many people will differ with that, including Sacha and Michael and everybody else. I think that there's never been in the history of all time any sustained period where there's a singularity of a stack. VMware's done pretty good for a while. By the way, there's never, like I said, in all of history, any extended period of time when there's been a singularity of a stack, right? So, our point of view is very simple. My mission in the Converge Platform Division today is basically to build turnkey CI and HCI to power VMware-powered clouds and cloud foundry-powered clouds. Tomorrow, tomorrow meeting on the 7th, immediately my strategic posture towards Microsoft Pivots. EMC has always had a partnership with Microsoft, but nothing like Dell's, right? So immediately I'm going to go, well, we must have the best on and off-premises version of the Microsoft Azure stack. Dell currently actually leads in that market, but it's very early days of that. So, we go from having two clouds, both on and off-premises, to a third one that we add. And then, of course, there's a fourth one, which says if you want to run your most mission-critical, business-critical, classic apps, VirtuaStream is the way to go for an SAP legacy landscape that you want to put in the cloud. That needs to have an on-premise variant too. So, four clouds, each one on and off-premises, each one of them available in CapEx or utilitized models. If we can pull that off, we can be the strongest cloud player on the market, or none. And I think that's cool. With the choice as the key sales pitch to the client, which is pick the cloud that does the best job, tool for the job. The thing that's interesting is sometimes choice is a euphemism for, bleh, like I have no strategy, I have no opinion, it's just pick whatever you want and assemble it. What I'm describing is something a little bit different, which is choice between four highly opinionated turnkey offers, right? Now, of course, we'll enable customers to build their own things, but I think that over time, less and less customers are going to want to do that. And Chad, I think that points to what we've seen in the way of converged infrastructure and cloud is we need to get out of that heterogeneous mess where I've got the poor guy buried in wires, running around, trouble tickets, and everything else like that. It needs to be simpler. We need to have the management tools. I mean, Chad, I want to get your viewpoint on VMware. One of the criticisms I've heard is kind of the cloud management stack. We've been swinging a bunch at this, and we don't yet have a solution that customers are happy with. Where do you think we are? Where do we need to go? So you've been around the block on this, and customers who are watching have been around the block on this. Cloud management platforms are tough. It's actually a very, very fragmented market with very little consolidation in the past or even looking forward. Now, inside that space, VRealize is actually the strongest, and it's the most deployed, it's the most widely used, but again, I don't want to make it sound like, ah, wouldn't you, number one, right? Clearly, there's a lot of work to be done. Last night, I was talking with Saje, who heads up the VRealize suite team, and what we've seen is that the team has done a lot of work out of the 6.x, 6.5.x days into the 7.x days, and customer feedback is that it's much closer to the mark. A, in terms of core product workflow, upgradeability, all of those sorts of things, but also in the fact that it actually has extended out to be able to automate and deploy on top of Azure and AWS in the beginnings of the extended CloudConnect vision. Now that said, in those four opinionated cloud stacks, now this is my personal opinion here, Stu, so I always have to, you know, save Harbor, all that jazz. I think that what you see is you see those highly opinionated cloud stacks, the CMP layers, the top part of it, being able to speak to each other, but always favoring their own ecosystem, right? And I think that we're going to be in that mode for a long time. Yeah, so Chad, some people might not be aware that in addition to kind of the VCE, you know, products in there, the solutions piece, and the cloud that you have, you know, the progress that you've made. We've talked to some of your team. I think we've got Peter coming on today. Can you talk about kind of the EHC, NHC, maybe even share a little bit of revenue if you can? Yeah, sure, so first things first, it's important to understand this at its core. The original idea of VCE, which is now like, you know, eight years old, was a basic premise that says we have a pile of giblets that are all awesome. However, customers struggle to assemble them and they want to have a turnkey offer that they can lean on us to not only deploy, but sustain, support as a single offering. That was the origination story. Replace server network and compute with hypervisor, IT business operations, a CMP, all of those things, and you have the enterprise hybrid cloud. We started getting lots of feedback from customers. We love vSphere, we love vRealize, we love vRealize automation and operations, we love all of this log insight stuff, we're all in with VMware, can you guys give us the easy button? And so we started on version one, then on version two, version three, 3.5, and this week we announced version 4.0. We're now up to hundreds of customers, so it's still in the like hundreds, but it is the most curated, the most turnkey way to get the VMware SDDC deployed. Now I still think we have a ways to go because we need to make it so push button easy and cloud foundations that Pat announced on Monday is a core part of that. Think of cloud foundations, turning into validated designs, and the enterprise hybrid cloud being the ultimate manifestation. Just a clarification, hundreds of customers, but from a revenue standpoint, that's probably bigger than the hyperconverged market. So you know what's fascinating? That's actually a fact. So I hadn't really thought about it, but basically we're currently on a revenue run rate that we don't disclose publicly, but I'm like, okay, how do I tiptoe around this? It is larger than the largest H CIA players by a good margin. So you're talking about hundreds of millions of dollars worth of annual revenue. And customers are saying, look, I'm in, I saw the keynote, I'm aligned with VMware, I want to go, right? And enterprise hybrid cloud is designed to do that. We keep reiterating on it on virtual geek. There's a whole slew of details on the 4.0 release. And then the other thing that we started to see is we started to see customers say, I get it, with the enterprise hybrid cloud, you've made my IT operations for classic IT better. How do you help my developers build a digital enterprise? Which doesn't start with infrastructure, and it doesn't start with IaaS. It starts with the way developers see the world, which is the platform layer. And we're on version 1.1 now of the native hybrid cloud, which is targeted at how do we build a platform for building cloud native apps? And that starts not with infrastructure, not with VMware, not with EMC, not with servers or network. It starts with cloud foundry. Chad, we got a wrap. I want to get one final point in, and I want to get your thoughts on it. More of a historical perspective, but also kind of futuristic. Take your EMC hat off, put the personal chat hat on. Ecosystem, where is it going to go? I mean, obviously it's consolidating, which means it's shifting. So the old ecosystem that was great and robust, as you mentioned, is not necessarily dying. It's just shifting, it's consolidating. So that means it's shifting to something else where there will be growth. Where is it moving? Where is that puck going? So people can skate to where the puck will be. That's a great question, John. And I'm always a geek at heart. I'm always going to run that vSphere cluster in my basement. It gives me joy and gratitude on cool new Intel, and you see so great stuff. But in my new job, you know, as the leader of a big business, the broad landscape picture is fascinating. So this isn't actually rocket science. You can decode it remarkably quickly. In industries that are declining or under pressure, secular pressure, consolidation is inevitable, and you have to pick your partners wisely. I think people underestimate how much giants they would think of as safe and secure bets or under pressure, and Michael was wise enough to take first mover advantage, because in those periods, no one has shrunk themselves to success, right? Conversely, you see very diversified ecosystems. When you see a very diversified ecosystem, Ergo, cloud management platforms, Ergo, security, like, oh my goodness, like the number of security startups and players, hyper-converged startups, I count 39 of them at the last turn, right? They go through a life cycle of explosion of ecosystem, and then inevitable consolidation phase, and people look at that consolidation phase and say, oh, it's the funds all over. No, that means that the fund has begun because you're actually now starting to really move the needle at customers, right? So you can expect to see consolidation in the security space. You can expect to see, by the way, very disruptive point technologies occur. The container ecosystem is going to explode and then consolidate, and when you see that consolidation happening, the container access go acquisition is one of the earlier indications in that space, but just one of them. It means that it's moving from sizzle to stake. Again, look at the open stack ecosystem. About a year ago, everyone was like, oh, all the funds over, all of them have consolidated down into the big, massive players. It's because people are now getting down to the bus stacks. The rubber's sitting in the road. Okay, so where is it going now? Where is the fund going to be? The fund is definitely going to be very much in new data fabrics and new applications. There's no rocket science there. The space that, you saw the tip of the iceberg on the cloud connection of how you can bridge. Bridge doesn't mean migrate. It means create connective tissue between on-premises and off-premises clouds. It's going to be really, really interesting. I think one thing that is fascinating is roles for human beings that span functions. That is the new magic, like Mojo. When I find someone who is a developer who understands infrastructure, they got Mojo. When you find someone who understands the span of what's going on inside the ecosystem, that person's going to appreciate it. As they say in baseball, the multiple tools are players, so I got to have multiple tools in their bag. Chad, we got a break, but I mean, great conversation. Thanks for coming on. Really appreciate you seeing you. Congratulations on all your business success. And September 7th is going to be the big close date for the mega transaction. It's going to be awesome. And by the way, guys, congrats to you. Seven years of this, it's great. I can't wait for next year. It'll be a lot of fun. Thanks, Chad. So I can hear inside the cube where all the things are happening here. VMworld inside the hang space at the Mandalay Bay this year for VMworld 2016. I'm John Furrier with Stu Miniman. We'll be right back. Thank you for watching the Cube.