 Francisco for VMworld 2015. This is Silicon Angle. It's theCUBE, our flagship program. We go out to the events and extract the civil noise. Day one of three and a half days of wall to wall coverage. I'm John Furrier, my co-host Dave Vellante. Our next guest is Mark Lewis, who's the CEO of Formation Data. Two years in stealth startup. Welcome back to theCUBE. Great to see you. Guys, great to be here. This is the best show ever, so. Industry Vet now entrepreneur. Congratulations on your launch. I'll be emceeing your launch event at St. Regis shortly and looking forward to that. So I got to ask you right straight up what is going on with this ecosystem? A lot of change happening. You've been developing for two years. You've been keeping your eye on the marketplace, building a company. What's the big trend? What are you guys tapping into? What are you water skiing behind in terms of the mega trend? It's amazing. To us, the mega trend is really this great amount of agility that I think the public cloud and DevOps models and whatever you want to call it, data as a service models are really aspiring to. But what we see is enterprise IT is stuck. They're stuck because they're stuck in the old legacy models. And you have all of these new things. You see the growth of AWS and Amazon, 81% growth last quarter. Just incredible growth, but enterprise IT is stuck. And I think they're all coming to shows like this, trying to figure out how to get unstuck. So that's what Formation was really built around, was how do we give basically enterprise IT a lever to get into hyperscale systems, to get into real data as a service, API connected storage, and even things like microservices. I tweeted last night to come up in the VM world and I said, cloud has changed the game. Architecture to achieve hybrid cloud needs to look at the same architecture on-prem and on-prem or private cloud. Explosion of containers in Kubernetes points to a new model of development where under the hood has to be lightweight, agile, and high performance. How does that relate to what you guys do? Because that seems to be the hot trend. I got to get hybrid cloud up and running in the environment, but I also got to power developers. Right. And the problem we saw was that to be very blunt, public cloud was a change of the model. It was an as-a-service model. If I wanted storage from Amazon, I'd put in my credit card and I have storage in two minutes. We created this term called private cloud, but it isn't the private version of that same thing. It was all the same old stuff relabeled in marketing terms. So we, everybody got stuck and then trying to hybridize those two things was kind of incongruous. So now what we have to do is we have to build real private clouds, that might use OpenStack, that might use Kubernetes, that start to use Docker, that start to do the real things that clouds need to do, which is to be user-driven, on-demand, dynamic, instant provisioning, all of those things. With tooling, by the way, that works across, right? Exactly. Once you do that, then start talking hybrid clouds. Right now, all the clouds are including Amazon and what VMware does is they're just gateways to move data from one to the other. It's like a hybrid cloud between AT&T and Verizon on my cell network. Each has import tools. Nobody has export tools. So that's the challenge and that's what we're seeing in the marketing. But now the developers inherit the baggage as well. So now, the people who are powering the environment in DevOps, for instance, have to enable developers. That also is table stakes now. How do you guys solve that problem for an IT manager or a corporation where, hey, they have a mandate. I want cloud-native development. I got to roll these stuff out fast. We just heard Sanjay Poonan saying, hey, business mobility is now a key thing. Secure our consumerization. That experience is a must-have. How do you guys help that? Yeah, we talked to a lot of customers and we actually found we had two problems. We started out to solve the problem of giving folks a real modern infrastructure on which they could build their new applications. The problem was the timing was such that they didn't know exactly if and how much and when they were going to build it. So investing too much in brand new infrastructure was kind of hit and miss. So what we said was, well, you don't want to keep buying the old infrastructure. So what if we made the new infrastructure compatible? We'll do NFS connectors and block connectors. So we'll give you a bridge to the old so you don't have to keep buying all of the legacy gear. And then we'll also support the new modern foundation for on-demand data services, API-connected storage. So that's how we are trying to bridge that gap now by building what I call data center modernization solutions that lets you start where you are but gives you all the tools to basically move into a DevOps app. Okay, so let me take the enterprise storage disruption equation one step further. And I want you to comment on these two points. All flash arrays on SLAs will drive the quality in tier one legacy environments. And two, distributed scale out storage architectures will ease the public cloud adoption. Do you agree with those? I agree on both. Their legacy is always something that is a very, very long tail. You just not go away. And there's this high end of the enterprise that is just like mainframes have been for 30 years, very entrenched, very important in the business side. And the best way to kind of services is to kind of, to me, make the underpinning as good as you can. And so that means, yeah, that classic enterprise model moves to flash and the best stuff it can. And that's kind of the best you can do within that framework. And it stays there for a long, long time. Everything else is where this big candidate is for real modernization to happen very, very quickly. And if you think about client server computing, it started at the bottom. It didn't start at tier one. It started at the bottom. So that's the same thing. I always joke, I say, you know, give us your crapplications because that's where we all start. And that's where VMware started when it was in test and dev. That's where all of the big companies start. You start with Sadie. So a great entrepreneur, what he solves the problem, makes a lot of money and then creates a new problem and then goes and solves that. Enterprise storage sucks, right? And you help perpetuate the problem. And I perpetuated a lot of it. So congratulations. And you know, you solve some problems, right? You companies made money, you're a very successful individual. So, and when you talked to me two years ago about what you were doing, you essentially described that we're going to encapsulate the legacy apps, bring them to the new world and drive cloud essentially into the data center. And I said, wow, okay. Everybody's going to get there within two years, but it almost seems as like we've gone backwards. Why? I mean, I'm actually thrilled for you. I'm not going to speak ill of the competition directly or by name, but it's amazing to me to see all of these new companies in storage. And for the most part, I don't see anybody solving the real problem. And to me, you have to have table stakes. You have to build enterprise storage. It has to be protect data. It has to have snapshots and all of those things. But what we were trying to do was to affect the agility of business. And the agility problem right now is who's kind of in control of provisioning and doing all the work. And even with hyper-converged systems and whatnot, in VMware, you have VMware administrators kind of being overloaded by having to do all of this work. We think the software should do that work. Software should do the provisioning. So when we get asked about integrating with vCenter, we're like, well, we will integrate some fault management, but it's not really that important to us because the user is going to provision storage. The app dev guy is going to provision storage. So it's just kind of irrelevant. And I think that too many folks get caught up when you're trying to innovate in, and I'll say this very carefully, listening too much to current customer problems and not trying to see their way to solving. Well, but it's true. It's a great path for making continuous profits, but it's incrementalism and it's safe. But it's not disruptive and innovative. One of the things you see on the website is 10X. If you're going to be a startup, you damn well better be 10X better. Or you're going to just go away. So to be 10X better, you can't just solve that incremental problem. Do you agree? Totally. And I would also say, I always cite the difference between evolution and revolution in storage. And I say the way you know revolution from evolution is the leader's change. So the last time the leader's change was when we went from monolithic storage to network storage, right? We had DEC, IBM, Sun, all the platform guys. And then we had EMC and NetApp. That was a revolution a year ago they changed. Now think about public clouds. Why that, I believe, has been disruptive is because a bookseller is your major player in public cloud. Must be revolutionary. I mean, you can almost assume it because there would be no right to play for a bookseller if they didn't really have something that was really profound. And so that's where I think people should look at this. And yes, the evolutionary steps are great. You embrace them. It's your kind of good, but it's not what's going to make a change for you. So no storage company since NetApp has really achieved escape velocity. True escape velocity. I mean Dave Scott would tell us that 3-part did, but no, it didn't. They didn't have the sales notice but they were inquired from me. I look at, what's the logo today? HP. HP. Right, exactly. So Amazon. Clearly this. Data domain was a great company. CMC. Right, so Amazon has achieved escape velocity. From an exit standpoint though, nothing was over 2 billion. 2.1 billion. But pure storage is a 4 billion dollar value. 90% of startups today are R&D for large storage companies. So will that continue? Maybe 99%. Five. Will we see another company achieve that level of critical mass in your view? Besides, Amazon is there. You will see formation. Really, you're predicting, that's your goal. We are the only one. That is our goal. We did not, I didn't set out to do something small. I didn't set out to be another one of the chain. AccuHires. Yeah, AccuHire. I love that. Nothing wrong with that chain. Hey, a billion dollar AccuHires. It's not bad. It wasn't what we said. I wouldn't have gone to all this trouble though to do that. I really honestly believe that 30 years of network storage is enough. And I honestly believe that while Google and Amazon, a lot of these guys got it right with cloud storage, they didn't give Enterprise IT a bridge. So Enterprise IT is still stuck. And they need this kind of bridge. They need more on-premise solutions. They need more control for their IT. They need data governance. They need things that are legitimate. And they'd still like to be in a cloud model. And Amazon doesn't want to give them a bridge. Amazon's saying, we've got a cool island. You've got to figure out how to get here. They want to import you to the island. Sweet, great. So this M&A thing about storage companies becoming an M&A path for the big companies is interesting. We've seen that track where you want to be different. So I did a little homework preparing for your event tonight. I said, okay, software defined storage. How does that relate to the trends that we follow? We care about the ones that are relevant. Like what developers are working on, what customers want. So I looked at the sales motions of the big companies and their acquisitions. Then I looked at Visa V, potentially your opportunity. So I want you to comment on this. Red Hat bought Ink Tank for the SEF purposes for $175 million. They had a lot of downloads, over 100,000 downloads, big developer traction, object plus file plus block, but poor performance. EMC plus scale I offer $200 million has for the enterprise, 10,000 plus downloads is really good. They have traction with developers, block only. You guys could replace both those products. Yet they don't, the way they sell them, it's like add onto their existing stuff. So are you targeting essentially that kind of opportunity because you could almost argue that, hey, I don't care where they go. I'm going to, I don't care how you slice and dice at EMC or Red Hat. When I started out in talking to customers. Is that an opportunity for you? Or you haven't thought about it yet? It is, and it isn't. SEF is one of our biggest opportunities in the sense that people get the idea that SEF can solve their problem, jump into SEF, realize they can't solve the problem and then they come to us. So it's a great feed-in for a rich drug. But let me explain why- No, but there's traction on the developers. They want that product. They do. But here's this two struggles that those companies have not really, or products haven't achieved, that I believe. There's a lot of guys, I can cite four or five and they'll probably be 10 by next year that can do block, file, and object. It's cool, but that's not game-changing anymore. Everybody's going to have snapshots. Everybody has all those features. It's, do you really have a DevOps model? Can you dynamically provision that stuff by the user? Or does it take basically, like with SEF, a 20-person team writing code around it? So we think the agility comes from, if you look at why people go to Amazon, it's not for cost. And it's honestly not for performance. It's because they can do things quickly and easily. And I think that's where people have missed. They're too focused on block, file, object and not enough focus on agility. I just got a direct message. Thanks from the crowd. Did anyone want to go public? Customers are choosing new vendors and open to change. It seems to be the thread. In theory, vSAN and EVO Rails should be winning the market. But other CI products are doing well. Newtonic, SimpliVity. So the market either doesn't want all VMware or there's a massive opportunity for others. How do you react to that comment? In the focus, I can think back to the day when I was at EMC and there was a worry about Microsoft getting into network attach storage and Microsoft had a lot of cred in the market, obviously. But sometimes you kind of gotta do what you're good at. And it may be a fear of, like you said, too much in one place. But it's also, I look at D-Rog, Newtonics. They have intense focus. They really are focused on a particular solution, a particular set of problems. In a jump ball situation, I think they've got a really good shot and I think they execute well. And I hope we can do the same thing. Scalows, a good product. But I don't think EMC will mature that to where it needs to be as quickly as we can take formation. Even with all those engineers. Well, this is the opportunity that you guys see. Right. Okay, so give us the take on the cloud. So Wikibon just put out research that 50% of the market for the cloud is fragmented. The number one vendor in public cloud is the other category. So what does that mean for you guys? What does that mean for the marketplace? It means that Amazon's doing really well and nobody has found the formula yet. But you guys talked about this in one of your sessions and I commented on it where we're, what inning are we in the cloud? Yeah, so you're a high post. And I said it's, what you got to think of is a double header. Here's two distinct curve. Cloud natives are in the cloud and the non-cloud natives are not. And so you really have these two curves going on where Amazon is the winner in cloud game one. Blew it away. It's 10 to one, everybody's done. 10 run rule. Yeah. Yeah, now we're in the end of it. But now you have game two. It's kind of a new game. Amazon has not won this game because there's some different rules in this game. There's the rules that enterprise IT needs a little bit more control, imagined or not. They want to govern their own data. They want a solution for their own infrastructure. They want a real hybrid cloud. So I think we're just playing the national anthem. I love it. And you saw that interview, we were all over the place. I was like, there's no way. That's why I'm coming. So again, this is the spectrum. There are the cloud natives and then we had VMware on here earlier. So that's cool. So give us the update. You got the event tonight. What's the thing on your thing? Oh yeah, so I do. Get a goat. I mean, who's the goat? So we are a revolutionary storage company and I don't know about you guys, but I get tired of coming to big shows and getting another mouse pad or a selfie stick. So we decided if we're going to be revolutionary, we're also going to be revolutionary in our marketing. So one of the things I loved was sustainability in charity. And so what we do is that if you come and you sign on to formation anytime, you get a demo from us. We will donate a goat in your name to a third world family that needs it. Fully sustainable. They use it for milk and fertilizer. And it's a sustainable thing where they can actually build on it. So I think, you know, this kind of sustainability. Is there a cap on the goats? How much VC funding do you have? We are not goat cap. I mean, we are not goat cap. I mean, you can get, I mean, we saw it, you can see the charity water was a home run. I mean, this is a really great opportunity. I think it's good if we can, you know, have fun, get the job done and kind of try to focus on a little bit about more charity in corporate life. I think it's good. So how many goats have you guys donated so far? Do you have any, share some numbers? I can't share the goat numbers yet because we're just, I mean, the program literally started yesterday with the thing. So no goat numbers yet, but I will tell you, it looks like it could be a pretty sizable. I'm going to get the bulk goat discount from the charity. As we say, we're the sports analogy. Someone of those vendors that don't make the transformation could be the goat of the industry, Dave. So we can always play on that later. Mark, thanks for coming on theCUBE. Really appreciate you spending the time and sharing some insight and commentary in the marketplace. Congratulations on formation and we'll see you tonight. This is theCUBE live in San Francisco. We'll be back with more live coverage for three and a half days of wall-to-wall coverage to theCUBE. I'm John Furrier with Dave Vellante. We'll be right back.