 From around the globe, it's theCUBE with digital coverage of VMworld 2020. Brought to you by VMware and its ecosystem partners. Hello everyone, welcome to theCUBE's virtual coverage of VMworld 2020. I'm John Furrier with my cohost, Uminiman and Dave Vellante. 10 years covering VMworld, so our 11th VMworld 2010 was our first. Guys, this is an unusual event. It's not in person. Kind of looking at the, analyzing the keynotes and essentially the main announcements in the general sessions. Let's analyze VMworld 2020. I know it's hard, we're not in person. A lot of the hallway conversation we're grabbing on Twitter, we've obviously got our CUBE interviews on theCUBE.net. There's a link on the front page of the VMworld site. Check it out and go check out all the dozens of interviews we're doing here with our community. But the event is digital foundation for an unpredictable world. That's the theme. Most of the announcements are around future architecture, but the blocking and tackling is around AI with NVIDIA. You've got security and you get some really key announcements around networking, Stu. So guys, what's your take on all this? Because VMware has to set the table. They've made good moves under Gelsinger's, last few years, you're seeing another Q2 successful quarter, Dave. You're starting to see VMware's investments pay off and the Ragu and the brainchild are behind VMworld making these calls to, guys, this is VMworld's moment to kind of go to the next level. What's your thoughts? Dave, we'll start with you. Well, I mean, as always, you saw VMware have on stage some really high profile guests. Saw John Donahoe from Nike, who knows a little bit about the enterprise, right? He left service now after a couple of years stint. Ironically, service now is pushing $100 billion valuation. Nike's at 150, but he's more comfortable in the consumer world. CEO of NVIDIA, I think that's a key move. NVIDIA, the ARM acquisition, that's going to be critical at the edge. You're seeing VMware just throw its blanket around telco edge cloud with VMware cloud and AWS, which is doing very well. We're going to talk about that in our cube segment. You're seeing them really go after hybrid. And so they're really about expanding their marketplace and they've done a great job of that is for translating engineering into customer value and getting paid for it. I want to come back to you, Dave, on this edge because some of the key trends that I think we've been on, now that's the whole world's kind of realizing that they're kind of going mainstream. One's been the edge. You mentioned ARM and we got analysis on that. Stu, cloud native, we've been banging on the cloud native drum. We've been riding that wave now with the Snowflake IPO just happened earlier. You're starting to see cloud native. Everything is coming true. It's kind of evolving in front of us right now and the whole world is now on board with this new mega trend. Enterprise computing companies, the largest IPO, since VMworld actually, if you look at Snowflake. So you're starting to see cloud native and enterprise technology as the next wave. This is huge and VMware is a big part of it. Your thoughts from how they did the show. Yeah, so John, one of the questions we always ask is, you know, how fast are customers moving? Are the vendors moving along with them? Our friend and often co-host the QP Townsend said, and it was kind of a faint praise. VMware has moved at the speed of the CIO. Dave, I've heard you so many times this year say that the impact of the pandemic, the financial ramifications has been an accelerator for many of the transformational journeys that we've been talking about, move to cloud much faster, adopting cloud native faster. Companies that have gone through their digital transformation are able to react much faster. And to be honest, I'm not sure that VMware is moving fast enough. We've seen them do a number of big acquisitions over the last few years. Some of them are doing great, you know, carbon black, great to see them go deeper into the security space. We've talked a lot about that before. Some of the others, you know, Dividle came out of VMware and got pulled back in. Datrium was a recent acquisition. What we hear inside is, you know, some of those groups and product lines have been trimmed back. So as companies are looking to move faster, they're looking to AWS as that bar. And while AWS is a big partner for VMware and very important, how many people will get to VMware on AWS and say, well, maybe I can scale back what my VMware state is or maybe those some of the environment. So, you know, we've said for the longest time, cloud is a double-edged sword for many players. You need to partner as closely as you can to keep that momentum going forward. But VMware is also getting cut by some of those deals. Boy, John, there was a big news a couple of weeks before the show here about how the VMware cloud on AWS, it's doing great. And if it's a big deal, well, the channel often gets cut out of it and Amazon's taking it. So there definitely are some things that put up a little bit warning lights for me as to who is winning when it comes to the partnership. That's a great point. The ecosystem at VMware, I'm the 10 years we've been covering today. This is our 11th year at theCUBE. We've always had that ecosystems evolving. And I think cloud native to me really sees how that's driving that with cloud. We saw that in a server list. You're starting to see cloud native. And what cloud proved, Dave, was that developers really shouldn't care about the infrastructure, should be abstracted away. But now you look at multiple cloud, what VMware is now moving into and having a multi-cloud kind of backbone, if you will, are connected to these environments as a key strategy. Then you look at the edge. The edge is about purpose built devices run with software and data. So whether it's at an office, on a person or in space, you have these devices that it's really not about the hardware, it's about the software running on them. They have to run in a multiple environments. They are purpose built. They do have to run like cloud native. The edge is the next opportunity for VMworld with multi-cloud. What's your thoughts and reaction to that? Well, I think there's no question. And again, the relevance of NVIDIA on stage, we think that ARM and NVIDIA are going to dominate AI inferencing at the edge real time and you're going to need much more efficient processing at the edge than you're going to get with traditional x86 architecture. So today what we're seeing is a lot of companies, you know, Dell, HPE included they're throwing over x86 boxes to the edge. I think they clearly realized that ARM is going to be a player there. And now with the NVIDIA move. And I think, you know, multi-cloud is really something that is starting to become real. I've often said multi-cloud has been more of a symptom than, you know, of multi-vendor than an actual strategy. Well, that's changing. I think people don't want lock-in. I think they realize that they've got the right horse for the right course. And you're seeing Red Hat and VMware emerge as real leaders there. You're seeing it in the data. You're seeing, you know, VMware cloud and AWS. Okay, that's in AWS. But you're also seeing VMware cloud foundation and it's other, you know, VMware cloud capabilities emerging as in demand, a lot of spending velocity, a lot of interest gaining share. And so these are becoming real and they're becoming fundamental strategies as to your points to CIOs are catching up and it's actually becoming not just slideware but realware. Well, I'll debate that whole idea that CIOs are catching up. But I'd say CISOs are already caught up. CIOs are catching up to the CISO. But, you know, this brings up the questions to what a modern app is. And this is one of the highlights of the show, modern applications. It feels a lot like kind of window dressing to the cloud native conversation because Tanzu's built into it. But, you know, cloud native really is, this is where the modern apps are being built. And it's about security. It's about multiple clouds. So the question for you is, are we going to have a cloudless architecture? Because we got serverless. Because if you think about modern apps, should you really care about which cloud it runs? I'm sure Andy Jassy would be saying he does care. And you see Google almost shying away from having that conversation. But, you know, Tanzu kind of speaks to a cloudless strategy. Is that something that you see? John, John, you're absolutely right. The goal we want is, you know, developers don't even want to think about the infrastructure at all. So cloudless, serverless, storageless, you know, it would all be wonderful if they didn't have to do that. Now, of course, you know, data's life brought up my business. We need to make sure that things are secure all the time. Serverless is wonderful. And there's even some early connections that, you know, VMware and others in the traditional infrastructure space are tying to the serverless environment. But if I look at VMware, John, this still isn't, you know, where the app dev team people come. This is an infrastructure show and it needs to be an enabler for what they're doing. If you look at how Kubernetes integrates into VMware, it's take your virtual estate and let's put containers in it and it can be managed in that environment. Or we've got some new tools we're developing and do some of that multi-cloud world. As opposed to the companies that are born in the cloud or have a heavy leaning towards the cloud, this might not be attractive for them. But in many ways, it's extending what VMware's done for a long time that they've got strong position here. And that's why John, as you said, all the other clouds want to partner with VMware because they've got, you know, just so many customers there that it will be, you know, it's hybrid today. It will be hybrid in the future. The public cloud is a full, but the edge is also full. So that those new architectures like are starting to be put forward with project Monterey, give people a roadmap as to where they can go and VMware absolutely is a key player in that discussion. Yeah, I want to bring this up real quick on project Monterey and then I want to get Dave's reaction to what the buyers are thinking about. Because, you know, we can debate the speed of the CIO and I'd love to have that debate in a separate segment. I think COVID and the security threats are forcing the businesses to really be focused because if you're not thinking about having an environment where people are working remotely and that's with COVID and obviously with the security vectors, if you don't have an architecture, Stu, then you're going to be screwed. So I think project Monterey feels to me as that VMware answer, like, look, and you can have an end to end architecture. And is it architecture or is architecture? That's one thought. So let's react to that, Stu. How much of that do you see as, look it, if you want to move faster CIO because they have to now move fast. COVID showed that and the ones that aren't are failing. And does it change the buyer behavior, Dave? Stu, we'll start with you, Monterey. John, I don't think we know yet. It is more architecture I'd see, you got to get into the whisper suites, have those discussions. There was not as much pre-briefing on this. We talked for a while, VMware on AWS, those solutions, they take two or three years to bake out. So I think Monterey is a good vision. They have some of the architectural underpinnings but I'm not ready to say, hey, you want to deploy that here in 2020, that's the blueprint that you want to use going forward. But it gets VMware seed at the table. I'm a big fan of the project. I think it's about time someone put a stake in the ground. So this is what modern architecture looks like and love to debate that further. We'll do that another time. Dave, buyers, what are they buying VMware? What's your data tell you in terms of where the customers are right now in 2020? You've been doing a ton of breaking analysis on COVID, buyer behavior, spending patterns. How does VMware and potentially its ecosystem stack up with all these focused cloud native, multi-cloud, modern app and security networking? Well, let's start with some data and I'll bring up this slide, which is this kind of wheel slide and it's ETR data that talks to what we call net score. And essentially what it's doing is it's taking the green in this wheel, which is spending more and it's subtracting the red, which is spending less or leaving. And then you see that in the middle it's 53% or flat. So they got a net score of 29, what does that mean? That means this is a mature company, which is amazing to me that VMware continues to really outperform from a financial standpoint. Yeah, so you could see the, we subtract the red from the green. This is again, a sign of a mature company. But the key is they've got to continue to invest. Now they make a lot of inorganic acquisitions and some organic acquisitions, but Dell as we know is using VMware's cash flow to restructure its balance sheet to go public, et cetera. So if you bring up the next slide, if you would guys, this is a slide I like to share and it shows in the vertical axis, spending momentum, which is net score and the horizontal axis, which is presence in the survey. This is a 1,200 person survey or a responded survey, IT buyers. Look where VMware cloud on AWS is. So while VMware has a 29% net score, look at VMware cloud on AWS. Look at VMware cloud, which is cloud foundation. And you can see red hat is in there with open shift, even open stack, believe it or not, in telcos. And then you see the hyperscalers in the upper right. Everybody wants to be AWS or Azure and you sort of see Google there. But the point of this is the momentum in hybrid cloud and multi-cloud and VMware really is clearly in a very, very strong position there. So, you know, back to your point about project Monterey, they're basically using this hybrid cloud notion to go everywhere. It's that TAM expansion that I love to talk about and it's the innovation. The big question is, if Tel is going to be squeezing VMware R&D, will it be able to continue to execute on that translation of engineering into product and customer value? That's going to be a challenge. We saw it, you know, decades ago where IBM got squeezed doing stock buybacks and dividends. R&D is the lifeblood of innovation. And so that's something that we have to watch very closely, I think. Stu, speaks to the, you know. Just one quick follow-up, Dave. We're talking about the financial pieces. Here we are in 2020. There's been the discussions and I know you've dug into it a bunch. By the time we get to VMworld 2021, will the ownership of VMware and the role that Michael Dell has change and will that impact that investment capability that you talked about, the cash flow? Just, I know you've done a lot of research on this and can it help educate our audience? Well, it's going to change the income statement of Dell because they won't have VMware in there anymore. It won't change VMware's cash flow. It will affect VMware and Dell's balance sheet. And so two companies, one chairman, and the chairman's going to say, okay, let's rebalance the balance sheets and create an equilibrium. So Dell has less debt. VMware has more debt and will try to thread the needle. So they're both investment grade, which will lower the interest costs on that debt. But fundamentally, I don't think it's going to change anything in terms of strategy, go to market, the close relationship between Dell and VMware. The thing to watch is VMware is Dell's piggy bank. And so I would rather see a lot of that go, once this equilibrium is reached, I want to see that go more in R&D. Again, remember IBM has spent $6 billion in R&D for the past two decades. IBM was right there. They could have invested in cloud the same way Amazon did and the same way that Microsoft did. They were kind of equal 20 years ago. And look what happened. You don't want that to happen to VMware. They must continue to spend on R&D and innovate. Well, let's get to the innovation strategy in a second, but I want to ask the ecosystem question because if you go back in history guys, and remember when Pat Gelsinger had that year where he was basically giving the presentation of his life and he was in the hot seat and there was a lot of rumors spinning around, since then it's just been nothing but exceptional performance on this company executing. All new bets have been played. It's almost like he cleaned house, put the ship in the right direction. They've been smooth sailing since, strategically making all the right moves. Okay, now that VMware is back on their footings and Dave and they have the solid foundation, what happens to the ecosystem? Because now that their house is in order, what do they do with the ecosystem? How do you see it evolving? Well, look, I mean the ecosystem is looking for alternatives. I mean, they have to participate in VMware. It's part of their go to market. You remember Todd Nielsen used to say for every dollar spent on a VMware license, 15 or 20 or $18 is spent in the ecosystem. You don't hear that type of ratio anymore. You know, maybe it still exists. I'm sure it does, because it's a very vibrant and robust ecosystem. But look, let's face it, Jeff Clark and Michael Dell are very clear. We are going to do a much closer integration than EMC ever did. And look at HPE, looking for alternatives, driving to the edge. That's a huge opportunity for people. So VMware becomes their, the ecosystem's cash cow, but they need new growth and new strategic opportunities. And so, you know, they got to play nice, but there's more green fields out there. Let's do multi-cloud and cloud-native with Tanzu. I think this is a really big opportunity to reset the ecosystem with services, because it used to be, you know, vendors, you bolt on some data back in the recovery and you have a bunch of people doing storage around VMware and, you know, these big white spaces, they're kind of huge white spaces. But now when you start getting into cloud-native, it's a whole new landscape developing your thoughts, because we're seeing some activity, certainly companies that are building on top of clouds, that are building on top of clouds. So you've got, you know, Snowflake builds on Amazon, now other clouds, and you have companies building on Snowflake. So you're starting to see this kind of new interconnected cloud-native landscape, your thoughts. Yeah, well John, there is definitely a huge tug of war in the ecosystem. One of the things that's been really nice, if you were a VMware partner, let's take data protection. Huge ecosystem, companies like Veeam were created in that environment. Hot companies like Rubrik and Cohesity grew very much working in VMware. All of them now play natively with the cloud environments, but they also get pulled along when you do a VMware cloud on AWS, on Azure, on Google, on Oracle. So VMware will pull some of the ecosystem with them, but that tug of war is, well, if the customer decides to just go fully cloud-native, that software needs to work there. And you would think that the vendor actually makes more money if it's just natively there. There's not that middleman extra piece. So VMware has a slice-to-pie, and like Microsoft or Oracle behind them, can they justify that value for the license that you're paying when I go to some of these environments? So VMware does not have the polling ecosystem. Dave talked a bit about it. HPE, Cisco, IBM, all companies that were early, early, big, huge proponents of VMware now very much are investing heavily in alternatives. So VMware, major player, but no longer the gravity that everyone orbits around. Dave, you're working. I want to bring up another data point if I could. I want to share something with you. This is a slide that talks about, it asks customers, why would you not work with VMware? Why would you replace them? What are the reasons? And three things stand out to me. It's not around cloud and the very left alignment with cloud, they've taken care of that with the AWS deal and even now Oracle. And you look at the right-hand side, you see technology lead or lag, that's innovation. Look at how that gray, a couple of surveys ago has gone down to the yellow. So that's off the table, not a problem with innovation. Look at total cost of ownership. That's gone down in terms of concerns. The one concern is price, and that stays up there. If that's your biggest challenge, that your price is too high, that says to me that VMware is ticking all the boxes of value. So they're in a really, really good position if they can continue to innovate. And that's why I've been harping so much on innovation and R&D and key acquisitions. They're a great acquirer of companies. So I see this data as very, very positive for VMware. If your price is too high and that's your big objection, you know, all you need is good salespeople. Well, also you'd lower the price and you shift the value to say new features, say cloud native or security. I see the movement they've been making with NSX, Gelsinger's famous quotes are things like, Kubernetes is the dial tone of the internet and NSX is the crown jewel. Security's a do-over. So NSX, Steve and Stu, this has been a big part of their theme every year. That's a core feature for their security play. That's where they're going to put a lot of value in there. You guys, what's your thoughts on that? Because you know, you got Cisco going there. Hmm, we're frenemies. That's what Sanjay Pune says, but are they really frenemies? But culturally VMware is an engineering driven company. They're a great engineering team. And they don't have dogma about these new, they don't get defensive about some new trends. They embrace, you know, Kubernetes. They finally figured out cloud. They were sort of defensive originally, but they realized, hey, and they got religion. So that's the smart thing to do. Go on to the next wave, maybe take a little bit ahead if you got to, if you got to go through a transition, but they've done a phenomenal job of making those transitions and staying relevant. What's the big wave? What's the big wave guys? What's the big wave that VM was riding? The 10 years out we're in, we've seen the movie. We've been through a decade with VM World Coverage too. Dave, next 10 years, what's the big wave? Or waves, plural? Well, cloud is the first one that they addressed, no doubt, and then they are in my mind, the leader or certainly a leader in multi-cloud edge. I think there's a big question mark there. AI is going to be everywhere. I think security is the really interesting opportunity for VMware and it's going to be, the big battle in security is do you go after these point products like Octa and CrowdStrike and Zscaler and SailPoint who are really doing very well right now in the market? Or do you want an integrated stack that can be good enough? VMware will say it's best to breed. We'll see, that is a huge opportunity for them because security just keeps getting more and more critical. We've seen that with COVID. Stu, final word on your thoughts on the next 10 years for VMware, looking back and looking forward. Yeah, well, Dave, just building off what you were just saying there, we said that the mission for Pac Gelsinger was, could he do for VMware what Indel had done for the longest time? Which is expand its TAM, expand what markets to go into but not completely take off the ecosystem and have them run away. So you saw here at the show, I mean, Dave, Zscaler is a partner there. Security absolutely is a monster opportunity and John, networking? Networking, right, should be a multi-billion dollar business for VMware and they can eat some of that multi-cloud environment. You know, we talked specifically about SD-WAN, fellow clouds doing well. So VMware, that software across environments, hybrid cloud, multi-cloud, they're well positioned today. They just need to move a little bit faster and make sure they don't bleed talent and continue to support their customers because Dave, you're right. How many times have people said, oh, Microsoft too expensive, Oracle's too expensive? Here we are in 2020. They still have pretty strong positions. VMware still has a very strong fit. Well, I'll just add, I think it shows what happens when you have a technical visionary like Gelsinger and the lead you have an industry visionary, not just technical, not just financial, but industry luminary like Michael Dell. These are very powerful. VMware and Dell have extremely capable management teams and you're seeing it in action. It's quite incredible. And you got Sanjay Kulna, who's a great executor as well. He knows how to execute. 100%. He knows technology. Guys, it's been a great run. I got to say for me personally, I'm so excited that for 10 years that we've had theCUBE and the team covering the enterprise tech space, you can't be more excited. At least I'm so excited that the number one IPO in the history of Wall Street is an enterprise tech company. You can't see any more proof points that enterprise technology is now with the whole end to end architects with the edge. We're talking about space. We're talking about cybersecurity. We're having now conversations with theCUBE that is now ranging. It reminds me, David, of the B2C world. It's almost like consumerized. Now, the enterprise technology is now so important. That is now taking over the appeal on Wall Street, entrepreneurs, and to me, if VMware can tap into that on this next wave, this will be huge. Your thoughts on that? Well, I think the snowflake IPO tells us several things. One, I totally agree. It says that technology is the now trend. No question about it. It also really underscores the cloud and it underscores the demand for issues other than the big Apple, Amazon, Google, et cetera. But it's really interesting to see as well that the street continues to reward growth. I mean, snowflake has a valuation higher than workday comparable to VMware. In fact, they exceeded VMware on its first day. So that says that the street is rewarding growth. It's rewarding technology. It's rewarding cloud. And so that to me says great opportunities for companies like VMware who have both growth, great cash flow, they're profitable, and they have a huge, huge customer base. So I think right now things look good for tech. Dave, enterprise tech is hot. It's sexy, don't you think? Enterprise tech these days? Yeah, it used to be storage is sexy. Now enterprise tech is sexy. Guys, great run, great analysis. Again, VMworlds virtual. We didn't have the face to face. We didn't have the hang space, but we have the virtual cube. Virtualization has come to the queue. We have multiple tracks on our site. Check out the content. Thanks for the analysis guys. Great keynote and announcement coverage of VMworld 2020. This is theCUBE. Thanks for watching.