 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 everybody. We're live here at VMworld 2014 in San Francisco, California. The world has been shaken by an earthquake over the weekend and now certainly here at VMworld. Dave, the tectonic plates have shifted again in tech. Again, this could have been worse. The earthquake really was really the biggest news and I think that there's a force major clause in every contract. Certainly earthquake qualifies. If this had happened in San Francisco, the destruction would have been over the top. Serious earthquakes, certainly in the epicenter in Napa Valley, has not affected anything in San Francisco. VMworld is going on as planned without a hitch. Maybe the no limits concrete theme doesn't really look good right now because concrete is a sign of rubble and certainly, I didn't want to bring that up in Robin, but certainly a risk and she's a little nervous about that, so we don't want to amplify that, although we just did. Well, you saw Pat walking on stage this morning prior to him coming on, right, the piece of concrete dropped from the, I mean it was staged, but they're breaking limits and breaking concrete, a big piece of concrete drops from the stage and then Pat walks out of this big opening that was created by them. I mean, not a good image. I would have scrapped that from the program, but a lot of good stuff here. VMworld. That's a tough audible to call, John. Come on. You got to pull that, I'm sorry. You got to get, that's like, got to be pulled. But we're not going to get critical on the keyness. Let's get critical on the products. Certainly VMware is all marching to the hybrid cloud. We brought up with Pat Gelsinger, our best guest today. Obviously the senior executive, the CEO, the chief executive officer of VMware, on here at theCUBE here. I brought up the halfway house concept. He called it a way station, this guino which he used last year here on theCUBE. It's, they're all in on hybrid cloud, Dave. I mean, clearly software defined data center, they're still chipping away at what it means. Certainly hybrid cloud is where the action is. Well, I mean, the statement is made. Hybrid cloud is the future and I'm, is it, I maybe, I don't know. We'll see. It's just interesting to juxtapose. You know, for instance, Andy Jassy's view of the world versus Pat Gelsinger and Joe Tucci's view of the world. They're completely counter poised. I think that when I go back to, let's say 2008, 2009 timeframe, and I listened to Paul Moritz talk about how they're going to build a software mainframe. And that, that term, that phrase stuck in my head. I said, wow, that's ambitious, you know. Never goes down, globally distributed, blah, blah, blah. Right? And the second thing he said is we're going to run any workload anywhere on VMware. We are going to be the platform for any type of application. And that's fundamentally happened. Well, that was the original vision. So that, so my point is that they laid out that vision and they've pretty much executed to it. So you got to give them props for that. Now, how they execute is different. Pivotal had to be created for Paul Moritz to move out to. VMware got pat Gelsinger, who was the president at EMC, comes over. And then there's Zimbra and the affinity to applications and Todd Nielsen and that was a big part of the strategy. It didn't work. Okay, so that's fine. I mean, not everything's going to work. But in general, the execution's been very, very good. Now, what I would say is back then, it was a sort of no-brainer. VMware was saving so much money for organizations by recapturing wasted server space, 10X value proposition. The big question I have is, how does VMware, the biggest criticism you hear from customers about VMware, it's expensive. Oh yeah, they saved us all the money, but what have you done for me lately? So you got to layer all these sets of services on top of it. It's expensive. So my big question is relative to the hybrid cloud is can the marginal economics of the data center compete with the public cloud? Because it's essentially linear with VMware's pricing model. And that is to me the big if. So they tick the box on Docker, they tick the box on OpenStack, they have not ticked the box in my opinion on Amazon yet. Amazon is kicking ass and taking names, no doubt about it. They're innovating it very fast, but that's public cloud. You heard Pat Gelsinger say, I wish we were in public cloud sooner. Okay, that was- We heard him say that about Flash, by the way, when they were at EMC, you remember? Yeah, and then what did they do? They moved very fast. But this is bigger. I think VMware, Dave, just my take on the whole VMware situation is this. The big picture to me is very simple. The dots are being connected. I think VMware, and the reason why I brought the prop today about what I got from there, opening up their office at Belo Alto is, it's a beautiful office. It feels like what HP was as when they were the player in the Valley. I think VMware could be the most important Silicon Valley company in recent history. I think certainly Google's done great. Facebook has kind of rose up, but some say Facebook might be a flash in the pan with the social networking not being taken as a serious player in business, other than kind of like advertising. Certainly Google provides great value. But VMware could be that next huge Silicon Valley company, a place where people want to work for, breakthroughs are being made, they're close to Stanford, they're actually leasing some land from Stanford. So VMware, I'm looking at that vision. Look what Pat Gelsinger is doing. He's taking that Intel mindset, bringing it to VMware. And I think that is something that's going to be an interesting cultural change for VMware. And so certainly that's going to resonate throughout the prize. And I brought the comment up early. I want to get your perspective on this because I love when analysts say, was that a defensive move? From buying a company or making an announcement like with Docker, is VMware making defensive moves or is it truly offense that Pat Gelsinger is playing? I 100% agree with what you're saying. I mean, I've never seen Pat Gelsinger Joe Tucci play defense, you know? I mean, I'll give you an example. Here's an example of Joe Tucci playing defense. Oh, NetApp's going to buy data domain? No, they're not. We'll buy him. Okay, that was kind of a defensive move. But then what do they do? They turned it into a multi-billion dollar business. So that's how they play defense. I just, I do not see a lot of defense going on here. I think these executives are looking at the opportunity. They've done a really, I think, good job, credible job of segmenting the TAM, communicating that, and then, you know, they're now trying to execute toward it. Again, I do think there is a blind spot. I think there's a blind spot in the entire IT business around the economics of what Amazon is doing. Not the price. Everybody talk about the price and how complex it is and blah, blah, blah, blah. It reminds me, John, of the days where, oh, it's just a toy, the PC. Right now, we're talking about a much grander scale within the enterprise, but I do think that's a blind spot, but I agree with you. There's no, there's no defense there. I want to also take on this whole federation with EMC and VMware maybe being spin out that's kind of shareholder revolt, or not shareholder revolt. Hostile shareholder's acquiring stock within EMC. It's really one, Elliott Capital, right? Yeah, so is it a shakedown or is it legit? Well, I think Elliott Capital is trying to do, you know, what they do best is make money in the short term, right? So they're saying, well, there's all this value locked inside of EMC, spin it out and that'll unlock that value. So, okay, is that a viable thing for a management, you know, of equity company to do? Sure. Is that the best thing for VMware? Questionable, is it the best thing for EMC? No way. Is it the best thing for the federation? No way. Is it the best thing for customers? That's an interesting debate, I think, John, that I'd like to have with you right now. What do you think? First of all, I think it's really crazy stuff. So to me, you don't know why people do things, right? You could say, you know, I'm also a conspiracy theorist on one level. One, you could argue that Amazon's initiating this move. Okay, you could argue that someone else might be initiating a move like Pure Storage. The competition landscape is so great right now for EMC and Amazon and others and because there's really only a few companies that could put EMC's federation out of business. Really? And that's a few. And it's Amazon and Google, in my opinion. Maybe Microsoft. Okay, but I just don't see Microsoft getting their ducks lined up to do that. You know, EMC's not shaking in their boots over Pure Storage. That's just a rounding number, nipping at the heels of the storage business. What could put EMC out of business, Dave? And affect VMware kind of collateral damage? Is Amazon? And all this docker stuff is really just, in my opinion, window dressing around the fact that everyone's racing as fast as they can, peddling as fast as they can to have a cloud solution for the enterprise. Bar none. In my opinion, this is what it's all about. So I think, here's what I would say to that. I don't think, you know, you said, I think you're being hyperbolic when you say to put them on a business. You mean as a real threat. I think what's going to happen. Well, a real threat. I think, right, I'm just sort of, you know, editing. So. Thank you. I think Amazon is a real threat to the enterprise. Not just the enterprise supply side, but I think the demand side as well. I think that data centers are in for a rude awakening relative to their current cost structures. And I think they're going to get hit really hard and there's going to be a big squeeze for those guys who don't, in some way shape or form embrace the public club. So let me just make this point. So does VMware need EMC to exist? No. No. That's Joe Tucci's architecture. He says federation players should operate on their own. But are there advantages to VMware of having EMC? Yeah, from a cash standpoint and some interesting things that they can do. Access to customers, all that stuff. Yes, but on balance, I think VMware would be just fine without EMC, but it's academic because EMC's never in the near term anyway, and even the midterm going to release, relinquish that asset. That would be, to quote a Tom Cruise line, galactically stupid on their part. So on the enterprise, let's talk about the enterprise landscape to customers, where the people who are paying the dough and the shift in how they're buying. The consumption of IT, the consumption of technology is certainly going to cloud. But I got to ask you, this is my theory. I just don't see IT and enterprises having a big developer core competency. If you go back to developers, goes back to the mainframe, that was probably the biggest tsunami of in-house development you've seen. Since then, you've seen client server and PC, shift the developer landscape to different areas. Management consulting firms for client server, like the Accentures of the World. And commercial off the shelf software. Commercial off the shelf, general purpose software with general purpose computing platforms. And then certainly the personal computer revolution, you saw it shift to shrink wrap software, and then the web became the web. So I think, Dave, we're back in the first time where the enterprises actually don't know what to do. They don't know how to hire developers and they don't have the core competency. They can't run to the management consulting firms, they got to bring the core competency in-house. So I think you're seeing a major shift where enterprises are saying, hey, we need to have developers in-house. Now, the only caveat to that is financial services, insurance, some of the high, high-end IT shops have it in-house. What's your take? Do you agree with that thesis? What's your analysis? Yeah, I think, I mean, you're nailing it today, John. I mean, I think there's no question about it that these internal IT shops are going to get disrupted. This is, people always say to me, you're focusing too much on marginal economics, but it really is the business model that is going to determine, and the economics that are going to determine what happens here. That's what it comes down to. And I think when you look at the economics of what's happening with cloud, it's driving mundane provisioning services, so-called outsourcing of infrastructure. It's driving that down to a software-like economic model, where essentially the cost of selling the next one goes to zero. And I think that's something that a lot of companies are trying to figure out right now. They haven't phrased it in those terms, but they're sitting on their hands. That's why you're seeing softness, generally, across the board in IT. You know, Meg Whitman is saying they grew 1%. That's better than shrinking. Okay, great, but you don't expect HP to start growing at double digits anytime soon. Why? Because people aren't buying what they used to buy. They're trying to figure out what to do. Now the other thing I wanted to add, the other blind spot, I think, for companies like VMware is open source. And that's where Docker, maybe it's not Docker, but projects like Docker can really disrupt a company that is known for its proprietary software. In a big way. So Docker's success, in my opinion, has to do with fundamentally one thing. The open source ethos of how they handle their community has been by far the number one factor in its success. What Docker basically is a container for application developers to put around their apps that can run on different kind of environments, clouds, infrastructure, especially DevOps. You provision to the container and it works across multiple environments and interoperates. But the secret sauce to Docker is the fact that you have to share your IP with the open source. And if you don't share, you don't get the benefit. So it's like, it's not like dual source license. It's just a different version of being open where sharing is the norm. The more you share, the more you gain. This is fundamentally accelerating the traction of Docker and has forced people's hands to saying, hey, apps are in charge. So hey, infrastructure guys, get your act together. In my opinion, that's my assessment. Now, there's some, you can discussion around that. You can argue that all day long. But to me, that's clearly why VMware is embracing this right now. And the beautiful thing about it is they don't have to do any acquisitions to do it. I mean, they bought member spring source. That thing kind of just, poof, disappeared. So they don't have to buy anything. All they do is join, embrace Docker and they get all the benefits. So I think this might be a good move for Pat Gelsinger in a big way. We'll see, we'll be watching it. I think that's it. Great day, Pat Gelsinger's on theCUBE. So one of the things I was talking about all these existential threats to VMware. I'm going to come back to the original statement I was making about execution. It's quite good. This company is going to do $6 billion this year. And they're focused, like a laser, on their three businesses. And I think that a company that's $6 billion growing at 18% a year, John, that's pure software. That's pretty good. And not a lot of people predicted that. And it's been fun to watch. We've been here since the beginning. So we're wrapping up day one. We're going to have three days of wall-to-wall coverage. I actually had Pat Gelsinger on CEO of VMware, the CMO of VMware. We had great guests all throughout the day. Tomorrow, more VMware executive, more CEOs. We have a VC panel of two alumni. We're going to have three of the biggest VCs in the business. Tier one venture capital firms. All ex-VMware alumni. Pete Sunsini from NEA, new enterprise associates. Also known as NEA. Jerry Chen, who, big cloud guy at VMware. Also an investor in Docker. He's now at Greylock. And we're going to have, obviously Steve Herry with General Catalyst come on theCUBE. All VMware mafias. We say VMafia, the VMware alum. So, stay tuned for theCUBE. Watch tomorrow. Come here live at SiliconANGLE.tv. Join us. That's a wrap for day one. This is theCUBE. Thanks for watching.