 From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hi, everybody, welcome to the special edition of CUBE Insights. This is theCUBE's 10th year at VMworld. And leading up to VMworld, we wanted to provide some data and some analysis to you all. And we're working with our partners at ETR, Enterprise Technology Research. We first introduced you to them when IBM consummated the Red Hat acquisition, and they provided some data. ETR is a firm that does really detailed and fast ongoing data. They have a large panel of end customers that they talk to about spending intentions, covering virtually every company in the enterprise. It's great stuff. We reached out to them and came up with a number of questions that we wanted to address around VMworld and VMware. So let me just start by showing you the questions that we asked them to help us with. And we did essentially what I call a drill down survey. So we took their existing data sets. They just did a survey. They completed one in July on spending intentions for the second half of the year, combined that with all the time series data that they had. So these are the questions that really are top of mind for IT decision makers and our community. First of all, what's the appetite for VMware spend in the second half of 2019? We'll share some data on that. The second point is there's narrative out there that containers are going to kill VMware. Well, is that true? What does the data say? How about multicloud? It's the hot topic. Who was best positioned in multicloud? Not only within the VMware ecosystem, but overall. Obviously VMware has designs on multicloud and is considered an early potential leader. How about NSX? When VMware bought NYSERA, it changed the game on networking, changed their relationship with Cisco. How is NSX impacting spending on Cisco? Particularly obviously in networking. The fifth question that we wanted to address is how is public cloud affecting VMware spend? We know public cloud is growing faster than on-prem. What's the impact on VMware? And then finally, it was announced in the press that VMware was going to acquire Pivotal. Why would that be? All right, so let's get into it. The first thing that I wanna address is the first question on spending intentions. So this slide really shows the results of the second half survey. It's 693 respondents representing almost $300 billion in spending power. And so essentially they were asked what your spending intentions for the second half of 2019. You can see 41% of the respondents said they're going to spend more and only 7% said they're gonna spend less. About 45% said they're gonna hold firm. Small number of 5% said they were gonna add new and only tiny, infinitesimal 2% said they were gonna replace VMware. So that's pretty good for an incumbent. And essentially it's holding serve and maybe doing a little bit even better than holding serve. And so we saw that as very positive. The next question that we wanted to address is the narrative of containers will kill VMware. We asked Pat Gelsinger about that on theCUBE. Years ago he said, hey, we're gonna use this as a tailwind, we're gonna embrace containers. So the bottom line is there's very little evidence that containers are hurting VMware, let alone killing VMware. This is a portion of the survey about 461 respondents. And you can see that the big blip early on back in July of 2017, big uptick in spending. And since then it's been relatively stable. But the important point here is the number of shared accounts. So we went to essentially container customers and asked them about their VMware spend. I say we, ETR did, this is what they do on an ongoing basis. And you can see the number of shared accounts back in 17 was only eight. But as you go to the right hand side, the more recent surveys are talking about 361 shared accounts. So the data sample got much bigger. No evidence that VMware is being negatively impacted by containers, affirming the assertion of Pat Gelsinger. Let's talk about multi-cloud. I have said that multi-cloud to date has largely been a symptom of multi-vendor. It's companies acquiring cloud technologies for specific workloads. It's shadow IT, it's pockets of cloud activity versus a coherent strategy to manage across multiple clouds. You know, true hybrid cloud, we're in the early stages. So the data here in our view shows that multi-cloud really is jump ball. Interestingly, however, Microsoft and Google is showing momentum. So what this slide shows is the cloud spending intentions and we picked the top five players that are sort of angling around multi-cloud. Google with Anthos, clearly Microsoft coming from its large software estate, VMware, of course, which many believe are an early favorite, Red Hat with the IBM acquisition and Cisco. So what's interesting here is Google and Microsoft clearly have a lot of momentum, kind of mind-sharing the marketplace, and not a lot of hardcore spending going on in multi-cloud, everybody has multi-clouds, but in terms of spending on specific products, like Anthos, for instance, from Google, designed to support multi-cloud, it's we're in the early stages there. But you can see the sentiment that buyers have around multi-cloud, Google and Microsoft showing momentum. Interestingly, VMware, Red Hat and Cisco kind of bunched up as the big enterprise players. So that's why we call it jump ball. We see it as wide open. You know, Cisco might surprise some people, but it really doesn't surprise us. Cisco's coming at multi-cloud from a position of networking strength. So each of these players has their strength. Google with Anthos, Microsoft from its software estate, VMware clearly as the data center operating system, Red Hat with OpenShift now with IBM services capability, and of course Cisco coming at it from networking and security. So hard to conclude who wins out of this data, but wanted to share that with you just in terms of what customers are thinking around multi-cloud. Okay, big conversation in the community around networking generally specifically NSX. When VMware beat Cisco to the punch and acquired NYSERA, it stated that we want to do to networking and storage what we did for servers. Well, what did VMware do to servers? They really co-opted the marketplace, changed the game, and really became the central point of server management. And that's what they want to do with networking. VMware is trying to deposition Cisco as a hardware vendor. Cisco is responding with its own software defined capabilities and there's an interesting battle going on. What is the data show? This shows that networking spend intentions for Cisco, the red line, and VMware, the blue line. You can see VMware NSX is kind of bouncing around, but has very high mind share. Whereas Cisco, it's showing a holding firm, but a very gradual decline. I've said many times Cisco, very impressive company, 60 plus percent market share, they've held that for a long, long time. Despite some of the successes that you've seen, by the likes of Arista and Juniper and F5, et cetera, Cisco has held its dominant share, but nonetheless, it's clear that NSX is impacting Cisco's dominance, certainly from a marketing standpoint, and you're seeing also from a spending standpoint that NSX is really challenging Cisco. It's going to be very interesting to see how that plays out over time. Okay, next question was, okay, what about cloud? How is that affecting VMware? We see the cloud numbers, we see the growth. What does that mean for VMware? And you can see here that this is cloud customers VMware spend, about 718 respondents. And you can see the number of shared accounts in the sample is substantial, 394, 379, 469. It obviously changes by the frequency that ETR does these surveys and they do them several times a year, as you can see. But large sample of shared accounts, and there's no question that cloud customers continue to shift more their spending to the public cloud and potentially at the expense of VMware. You can see the gradual decline here and somewhat precipitous decline. VMware's still very strong, stock price is doing great, but there's a little question in our mind that long-term, VMware, despite cleaning up its cloud strategy with first the AWS partnership and also now partnerships with Google and Microsoft and of course IBM as well, they were first, but having public cloud partners, nonetheless we see that over time there's a real tension there, that on-prem is not going to grab the market share that growth that the cloud has and that is a challenge for VMware that we continue to watch. Finally, Pivotal, why would VMware acquire Pivotal? Well, first of all, this is why. Pivotal is not working. It doesn't have the momentum that it wants in the marketplace. You can see it's pretty steep decline over the last couple of years and it's precipitous drop in stock price. And essentially Dell and the governance structure of Dell Technologies, which of course owns VMware, it owns a large portion of Pivotal, saying, look, let's roll this back in. Let's give the stock price a boost. Stock went up 70 plus percent of the day that Dell went down 800 points and so this is why VMware would buy Pivotal. It's a forcing function we believe from Dell. It also makes sense. Dell in its family, Dell Technologies, it has these software assets. VMware is the mother ship of the Dell software operation, so why not fold it in? Personally, I think they should do it with some other software assets as well. Secureworks, Dell Boomi, RSA, all candidates to roll in potentially over time to VMware, at least portions of it anyway. Okay, so let's summarize. What are the key takeaways? What's the appetite for VMware in the second half of 2019? Pretty solid, we'd say. Will containers kill VMware? There's no evidence, certainly in the near term. But there are threats. Think about SaaS. How many SaaS providers are actually running VMware? So as SaaS continues to grow in prominence, that is a potential blind spot for VMware that we're watching. Whose best position in multi-cloud? It's wide open. Microsoft looks strong, Google clearly has some momentum. Cisco maybe surprises many, but I think it's not gonna be a winner take all. We feel as though there's a lot of opportunities, but number one is gonna make the most money and so it's a very important space that we're watching. How's NSX impacting Cisco spend? It's a battle, but NSX is clearly negatively pressuring or pressuring Cisco. How about public cloud? How is that affecting VMware spend? We think it's slowly eating away at on-prem, including VMware. I want to share with you a quote from one of the customers that ETR talked to. It's a head of a retail consumer organization in North America, long-time IT practitioner, says VMware is everywhere that I've ever been. He's been a long-time VMware customer, he or she means. It's the standard, but it's an interesting situation to see what's their next step. How do they keep themselves relevant? I think they're always going to be a need for VMware, especially because the ability to have the privacy of an extended network is key. However, with the cloud-based environment and encrypted data, it's going to be interesting to see how that all plays out. How VMware deals with that approach, I think their next strategic steps are going to be crucial, and I think that VMware has to be thinking long-term. Okay, what do we do about cloud? Remember, VMware early on tried to get into cloud and with its own public cloud option became VCloud Air. It failed, they got rid of it, cleaned up their cloud strategy, but why did VMware originally want to get into that business? Because they know that's where all the growth is. So yes, hybrid and multi-cloud gives VMware a lot of runway. The partnership with Amazon has a lot of momentum. I didn't share that data, but it's very clear that AWS, VMware on AWS has strong momentum. And so that's certainly what the ETR data shows. Nonetheless, long-term, you got to ask, what strategic moves will Michael Dell make to secure their position in the public cloud? Okay, lastly, why would VMware acquire Pivotal? That's a duh, okay, we kind of stated why. So that's the deal. Thanks to our friends at ETR, I really appreciate them sharing the data, enterprise technology research. If you wanted, there's so many cuts on the data, it's unbelievable. You can cut it by large companies, small companies, industry applications, and in every company on the planet, you can compare companies together. It's really a powerful set of data, but also access tools that they've developed. Very, very nice, really modern version of survey panels. And so follow up with us, follow up with them if you want more information. And watch us at VMworld. We'll be covering these and many other issues at our 10th year at VMworld. All the key execs are going to be on, practitioners, customers, partners, and of course, analysts and the broader ecosystem. Technologists and John Furrier, Stu Miniman, myself and the entire CUBE team will be there to celebrate. So check it out, cube.net, and we'll see you next week. Thanks for watching.