 From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hi everybody, welcome to this week's breaking analysis. It's Friday, October 18th, and this is theCUBE Insights powered by ETR. Today, ETR had its conference call, its webcast. It was in a quiet period, and it dropped this tome. I have spent the last several hours going through this data set. It's just unbelievable. So it's fresh data from the October survey, and I'm going to share just some highlights with you. I wish I could, I wish I had a couple of hours to go through all this stuff, but I'm going to just pull out some of the key points. Spending is flattening. We've talked about this in previous discussions with you, but things are still healthy. We're just reverting back to pre-2018 levels and obviously keeping a very close eye on the spending data and the sectors. There is some uncertainty heading into Q4. It's not only tariffs, 2020 is an election year, so that causes some uncertainty and some concerns for people, but the big theme from ETR is there's less experimentation going on. The last several years have been ones where we're pushing out digital initiatives and there's a lot of experimentation, a lot of redundancy. So I'm going to talk more about that. I'm going to focus on a couple of sectors. I'm going to share with you the overall sector analysis and I'm going to focus in on Microsoft and AWS and talk a little bit about the cloud and then we'll give some other highlights in particularly around enterprise software. The other thing I'll say is that the folks from ETR are going to be in the Bay Area area on October 28th through the 30th and I would encourage you to spend some time with them if you want to meet them. Just contact me at dValante on Twitter or david.valante at siliconangle.com. I have no dog in this fight. I get no money from these guys. We're just partners and friends, but I love their data and they've given me access to it and it's great because I can share it with you, our community. So let's get right into it, Alex. If you just bring up the first slide, what I want to show is the ETR pulse check survey demographic. So every quarter ETR does these surveys. They've got a dataset comprising 4,500 members, panelists, if you will, that they survey each quarter and this survey 1,336 responded, representing 457 billion in spending power and you can see from this slide, it's got a nice mix of large companies, very heavily weighted toward North America, but you're talking about 12% of MIA out of 1300, certainly substantial and statistically significant to get some trends overseas. You can see across all industries and then job titles, a lot of C level executives, VPs, architects, people who know what the spending climate looks like. So I really like the mix of data. Let me make some overall comments and Alex, the next slide sort of gives some snapshot here. The big theme is that there's a compression in tech spending, as they say. It's very tough to compare to 2018, which was just a phenomenal year. I mentioned the tariffs as an election year. Election years bring uncertainty, uncertainty brings conservatism. So that's something obviously that's weighing, I think, on buyer's minds and I'll give you some anecdotal comments in a moment that will underscore that. There's less redundancy in spending. This has been a theme of ETRs for quite some time now. The last few years have been a try everything type of mode. Digital initiatives were launched, let's say starting in 2016. ETR called this, I love this, Tom Delvecchio, the CEO of ETR called it a giant IT bake-off where you were looking at, okay, cloud versus on-prem or SaaS versus conventional models, new databases versus legacy databases, storage, legacy storage versus sort of modern storage tax. So you had this big bake-off going on and what's happening now is you're seeing less experimentation, so less adoption of new technologies and replacements are on the rise. So people are making their bets. They're saying, okay, these technologies are the ones we're going to bet on these emerging disruptive technologies so they're narrowing their scope of emerging technologies and they're saying, okay, now we're going to replace the legacy stuff. So you're seeing these new stacks emerging. I mentioned some others before by things like cloud native versus legacy waterfall approaches and these new stacks are hitting both legacy and disruptive companies for the reasons that I mentioned before because we're replacing legacy but at the same time, we're narrowing the scope of the new stuff. This is not necessarily good for the disruptors. Down turns sometimes are good for legacy because they're perceived as a safer bet. So what I want to do right now is share with you some of the anecdotals from the survey and I'll just call out some things. By the way, the first thing I would note is ETR did sort of an analysis of frequency of terms, cloud cost, replacing change, moving consolidation, migration and contract were the big ones that stood up. But let me just call a couple of the anecdotals. When they do these surveys, they'll ask open-ended questions. And so these kind of give you a good idea as to how people are thinking. Projecting, we're projecting a hold based on impacts from tariffs. Situation could change if tariff relief is reached. We're really concerned about EU. Another one, shift to SAS is accelerating and driving TCO down. Investing in 2019, we're implementing and retiring old technologies in 2020. There's an active effort to consolidate the number of security vendor solutions. We're doing more Microsoft. Let's see, we have moved to a completely outsourced infrastructure model. So no longer purchasing storage, interesting. In general, we're trying to reduce spending based on current market conditions. So people, again, are concerned. Storage as a category is way down. We're moving from tarot data to AWS and a data lake. I'll make some comments as well later on about EDW and Snowflake in particular, who remains very, very healthy. We're moving our data to G Suite and AWS. We're migrating our SAS offering to Elastic. We're sunsetting Cognos, which is, of course, is owned by IBM. Taland, we decided to drop after evaluating Tableau. We've decided to not integrate anymore, even though Tableau is actually looking very strong, subsequent to the Salesforce acquisition. So there's some comments there that people, again, are replacing and are narrowing some of their focus on spending. All right, Alex, bring up the next slide. I want to share with you the sector momentum. So we've talked about this methodology of net score. Every time they do ETR does one of these pulse surveys, they ask, are you spending more or are you spending less? Are you spending the same? And then essentially they subtract the spending less from the spending more. And the spending more includes new adoptions. The spending less includes replacements. And that comes out with a net score. And that net score is an indicator of momentum. And what you can see here is the momentum I've highlighted in red is container orchestration, the container platforms, machine learning, AI, automation, big theme. We were just at the UI Path Conference, huge theme on automation, and of course robotic process automation, RPA. Cloud computing remains very, very, very strong. This dotted red line that I put in there, that's at the 30%, 35% level. You kind of want to be above that line to really show momentum. Anything below that line is either holding serve, holding steady, but well below that line when you start getting into the low 20s and the teens is red zone. That's a danger zone. You can see data warehouse software is kind of on that cusp. And I'm not a huge fan of the sector in general, but I love snowflake and what they're doing in the share gains that are going on there. So when you're below that red line, it's a game of share gain, storage, same thing. We've talked about the overall storage sector is down. It's being pressured by cloud as that anecdotal suggested. It's also being pressured by the fact that so much flash has been injected into the data center over the last couple of years, that's given headroom for buyers. They don't need as much storage. So overall, the sector is soft, but then you see companies like Pure continuing to gain share. So they're actually quite strong in this quarter survey. So you can see the sort of various sectors here. IT consulting and outsourced IT, not looking strong, data center consolidation. By the way, you saw in IBM's recent earnings, Jim Kavanaugh pointed to their outsourcing business as a real drag. Some of these other sectors, you can see actually PC laptop, this is obviously a big impact for Dell and HP, kind of holding steady, actually better than storage. So for that large of a segment, not necessarily such a bad thing. Okay, now what I want to do, I want to shift focus and make some comments on Microsoft specifically and AWS. So here's just some high level points on this slide on Microsoft. The end out of that total was 1200. So very, very large proportion of the survey is weighted toward Microsoft. So a good observation space for Microsoft. Extremely positive spending outlook for this company. There's a lot of ways to get to Microsoft. You want cloud, there's Azure. Visualization, you got Power BI. Collaboration, there's teams. Of course, email and calendaring is Office 365. You need hiring data, oh, we just bought LinkedIn. CRM, ERP, there's Microsoft Dynamics. So Microsoft is a lot of roads to spend with Microsoft. Windows is not the future of Microsoft. Satya Nadella and company have done a great job of sort of getting out of that dogma and really expanding their TAM. You're seeing acceleration from Microsoft across all key sectors, cloud, apps, containers, MI or machine intelligence, AI and ML, analytics, infrastructure, software, data warehousing, servers, GitHub is strong. Collaboration, as I mentioned, so really across the board, this portfolio of offerings, powered by the scale of Azure is very, very strong. Microsoft has great velocity in the cloud and it's a key bellwether. Now the next slide, what it does is compares the cloud computing, big three in the US. Azure, AWS and GCP, Google Cloud Platform. This is again, net score. This is infrastructure as a service. And so you can see here, the yellow is Microsoft, that darker line is AWS and GCP is that blue line down below. All three are actually showing great strength in the spending data. Azure has more momentum than AWS. So it's growing faster. We've seen this for a while, but I want to make a point here that didn't come up on the ETR call, but AWS is probably two and a half to three times larger in infrastructure as a service than is Microsoft Azure. So remember, AWS has a $35 billion, at least, run rate business in infrastructure as a service. And as I say, it's two and a half to three times at least larger than Microsoft, which is probably at a run rate of, let's call it 10 to 12 billion. Okay, so it's quite amazing that AWS is holding at that 66 to six now dropping to 63% net score, given that it's so large. And so, and of course, way behind is GCP, much, much smaller share. In fact, I think probably Alibaba has surpassed GCP in terms of overall market share. But so, any rate, you could see all three, strong momentum, the cloud continues its march. I'll make some comments on that a little bit later, but Azure has really, really strong momentum. Let's talk next slide, if you will, Alex, about AWS. Smaller sample size, 731 out of the total, which is not surprising, right? Microsoft's been around a lot longer and has a lot more plays in a lot more sectors. ETR has a positive to neutral outlook on AWS. Now, get to be careful here, because remember, what ETR is doing is they're looking at the spending momentum and comparing that to consensus estimates. Okay, so their ETR's business is helping, put largely Wall Street, you know, buy side analysts, make bets. And so, it's not only about, you know, how much money they make or what kind of momentum they have in aggregate, it's about how they're doing relative to expectations, something that I explained on the last breaking analysis. Spending on AWS continues to be very, very robust. They've got that flywheel effect, make no mistake that this positive to neutral outlook is relative to expectations. Relative to the overall market, AWS is kicking butt, cloud, analytics, big data, data warehousing, containers, machine intelligence, even virtualization, AWS is growing and gaining share. My view, AWS will continue to outperform the marketplace for quite some time now. And it's gaining share from legacy players. Who's it hurting? You're seeing companies within AWS's sort of sphere that are getting impacted by AWS, Oracle, IBM, SAP, you know, Cloudera, which we mentioned last time was at all-time lows, Teradata, these accounts inside of AWS respondents are losing share. Now, who's gaining share? Snowflake, Snowflake is on a tear. Mongo is very strong. Microsoft, interestingly, remains strong in AWS. In fact, AWS runs a lot of Microsoft workloads. That's fairly well known. But again, Snowflake, very, very strong inside of AWS accounts. There's no indication that despite AWS's emphasis on database, and of course data warehouse, that Snowflake's being impacted by that, the reverse. Snowflake is taking advantage of cloud momentum. The only really negative you can say about AWS is that Microsoft is accelerating faster than AWS. So that might upset Andy Jassy, but he'll point out, I guess what I pointed out before, that they're much, much larger. Take a look at AWS on this next slide. The net score across all AWS sectors, the ones I mentioned, and this is the growth in Fortune 500. So you can see very steady in the large accounts. That's that blue line dipped in the October 18 survey. But look at how strong it is, holding 67% in Fortune 500 accounts. And then you can see the yellow line is the market share. AWS continues to gain share in those large accounts when you weight that out in terms of spending. That's why I say AWS is going to continue to do very, very well in this overall market. So just some comments on cloud. As I said, it continues to march. It continues to really be the watchword, the fundamental operating model, Microsoft very strong, expanding its TAM everywhere. I mean, affecting potentially Slack, Box, Dropbox, New Relic, Splunk, IBM and Security, Elastic. So Microsoft very, very strong here. AWS continues to grow, not as strong as 18, but much, much stronger than its peers. Very well positioned in database and artificial intelligence. And so not a lot of softness in AWS. I mentioned on one of the previous breaking analysis, Kubernetes actually containers a little soft. So that's what we always keep an eye on on that one. At Google, again, struggling to make gains in cloud, one of the comments I made before is that the long-term surveys for Google look very positive, but that's not showing up yet in the near-term market shares. All right, Alex, if you want to bring up the next slide, just I want to make some quick comments before I close on enterprise software. There was a big workday scare this week. They kind of guided that their core HR business was not going to be as robust as it had been previously. So this pulled back all the SaaS vendors and the stock got crushed, Salesforce got hit, ServiceNow got hit, Splunk got hit. But I tell you, you look at the data in this massive data set, ServiceNow remains strong, Salesforce looks very, very strong, slight deceleration, but very sound, especially in the Fortune 100 and that GPP, the giant public and private companies that I talked about on an earlier call, that's one of the best indicators of strength. Up Tableau actually very strong, especially in large accounts, so Salesforce seems to be doing a good job of integrating there. Splunk.coff coming up shortly, I think this month. Security is a category, very, very strong, lifting all ships, Splunk looks really good despite some of the possible competition from Microsoft. There's no indication that Splunk is slowing. There's some anecdotal issues about pricing that I talked about before, but I think Splunk is really dealing with those. UiPath's another company, we were just out there this past week at the UiPath Forward Conference. UiPath, in this data set, when you take out some of the smaller respondents, smaller number of respondents, UiPath has one of the highest net scores in the entire sample. UiPath is on a tear, talked to dozens of customers this week, very, very strong momentum, and then moving into the new areas. I'll be focusing on the RPA sector a little later on, but automation in general really has some tailwinds in the marketplace. And you know, the other comment I'll make about RPA is a downturn actually could help RPA vendors, who by the way, all the RPA vendors look strong. Automation anywhere, UiPath I mentioned, Blue Prism, even some of the legacy companies like PEGA look actually very strong. A downturn in the economy could help some of the RPA vendors because people would be looking to do more with less. And automation could be something that they're looking toward. Snowflake, I mentioned again, they continue their chair, very strong share in expansion, slightly lower than previous quarters in terms of the spending momentum, but the previous quarters were off the charts. So also very, very strong in large companies. All right, so let me wrap. So buyers are planning for a slowdown. I mean, there's no doubt about that. It's something that we have to pay very close attention to. And I think the market expects that and I think it's okay. There's less spaghetti against the wall. We're going to try everything. And that's moderating, having a moderating effect on spending, as is the less redundancy. People were running systems in parallel. As they say, they're placing bets now on both disruptive tech and on legacy tech. So they're replacing both in some cases or they're not investing in some of the disruptive stuff because they're narrowing their investments in disruptive technologies. And they're also doing replacing some legacy where clearly seeing new adoptions down, according to ETR, and replacements up. And that's going to affect both legacy and disruptive vendors. So caution is the watchword, but overall the market remains healthy. Okay, so thanks for watching. This is Dave Vellante for Cube Insights, powered by ETR. Thanks for watching this breaking analysis. We'll see you next time.