 From Austin, Texas, it's theCUBE, covering Pure Storage Accelerate 2019, brought to you by Pure Storage. Welcome to Austin, Texas. I'm Lisa Martin. At Pure Accelerate 2019, this is the fourth Pure Accelerate. I'm here with my co-host, Dave Vellante. And Dave and I are pleased to be welcoming back to theCUBE the Chairman and CEO of Pure Storage, Charlie Giancarlo. Charlie, welcome back to theCUBE. Thank you, it's such a pleasure to be here. Already getting loud and the keynote just wrapped up. It really is, yeah. There's about 3,000 folks here. Correct. Standing room only, we just came from the keynote. Something symbolic besides the location of this event is that you are just about to celebrate the 10th anniversary of Pure Storage. Of our founding, October 1st. Yes, just around the corner, tremendous innovation, as you say, in overnight success in 10 years, delivering 10X improvements. Give us a little bit of a preview about what you shared in the keynote. What's to come in the next 10 years? Exactly right. You know, it's wonderful to be able to celebrate a birthday and be able to talk about what you've delivered over the first 10 years. But it also gave us the opportunity to really say, okay, what's the second decade going to be about? What is it going to be like? And when we were planning, not only for this, but for the year that we were going to put in place of development, we said, well, we brought a lot of things to storage and to the storage array. We made it much simpler. We made it upgradable non-disruptively, meaning that customers would have a continuously new product in their environment. And we started to bring it into the cloud. And we said, you know, for our second decade, we want to transform the entire storage experience. We don't want it to be about boxes and arrays. We want it to be about a storage system for the entire enterprise. That's multi-protocol, multi-cloud, multi-tiering, or what we call storage classes. And entirely automated so that when an application calls for storage services, it's delivered automatically without humans getting involved. That it is completely as a service, consumed as a service, delivered as a service, entirely automated in the back end. So this is the goal that we have for our second decade. We think we're going to deliver it over the next several years. But of course, for us to go down the entire customer journey is a great mission for us for next decade. So in terms of, you know, I don't want to make it sound like the first decade was easy because you're really the only all-flash array company to reach escape velocity. And there were many. But at the same time, you caught EMC flat-footed, you drove a truck through there, installed base, and you know, obviously the rest is history. I feel like the main job of the CEO is TAM expansion. And you're focused on that. There's AI, there's new workloads, there's the cloud, there's multi-cloud. And you're entering new territory now. Yes. Maybe, you know, guys like AWS, they're not flat-footed, right? You're up against Google and Cisco and Microsoft and in the multi-cloud arena. But you're a specialist. I wonder if you could talk about your vision in terms of TAM expansion. Well, thank you very much for that question. The TAM expansion really is following where solid state takes us. You know, we've gone from a world that was where, believe it or not, most computers still had mechanical systems operating them. Sort of like having a mechanical calculator rather than an electronic calculator, right? We had mechanical disks in our computers, literally spinning rust, right? And it's only been in the last decade where a semiconductor, you know, where solid state has taken the place of that called flash, right? Well, as that continues to get less expensive, we now can bring not only flash performance into disk economics, but more importantly, now we can finally have modern software that is driving the need for having greater flexibility with our data. As data grows, it now, we say it has gravity. That is, it gets heavy. It gets hard to manage, hard to move between different environments. And now a lot of infrastructure operators are spending much more time managing their data, managing the storage systems for their data than they are managing anything else in the data center environment. We want to eliminate all that. We want to automate all of that. You know, on the theme of decades, two decades ago, every application had its own individual communication stack. There were dozens of different protocols and a dozen different networks in every company. One decade ago, every application had its own custom hardware stack and custom operating system stack. Well, today, there's one network. It's called the internet. Today, every application, every server is virtualized, allowing mobility, and yet storage is still static. We want this decade to be about making storage and data dynamic and really responsive to the needs of the application environment. So I wonder if you could compare this opportunity to some other mega trends that you've been part of. You were there in the early days of wireless when nobody wanted to buy wireless. You saw the IP change up. People think the mini computer was killed by the microprocessor in a part it was, but it was IP. It was IP. It destroyed the mini computer. Everybody had their own networks. Where do you put the trend that you're after? How do you compare, and what are your expectations? I think it's an analogous trend, and it's this long-term trend of vertical, whether it's vertical industries or vertical technologies, going to be coming horizontal. So let's just give a couple of examples. Again, networking was tightly tied to the application, and every application had its own network and its own set of protocols, right? That was vertically tied. Now networking is horizontal. It's all IP, right? Again, we'll go back to applications. Applications had a vertical stack. The entire stack hardware and software was tied to the specific application. Today that's been made virtualized and therefore horizontal. You can move applications among different servers. Storage is still vertical. It's still tied very tightly to the rack, and there are a lot of good reasons for that. You needed a high-speed interface. High-speed networking didn't exist. Discs were slow. They could only support one application at a time. With solid state, that no longer exists. So now we can make storage free. We can make it a horizontal layer rather than tightly tied to any individual application, and that's what the next decade's going to be about. Your business leaders today, I feel, are so much more open than when we started in this industry where the famous line about Ken Olson, Unix, Snake Oil, those of you old enough to remember that. Business leaders today, they recognize the trend as your friend. So a gentleman from AWS said 88% of the customers in a Gartner survey said they're cloud first, but 86% are still spending on-prem. In the old days, you might have said, oh, keep it on-prem. And Amazon said, well, keep it in the cloud. And yet, customers are sort of forcing you to come together. I wonder if you could talk about that dynamic and specifically your cloud strategy. Absolutely. So our cloud strategy is really quite simple. We want to make the cloud and every cloud appear to an application developer to be the same as it is on-prem. With all the advanced services, the advanced applications interfaces, the same APIs. Because largely applications have been, especially primary tier applications, have been developed with on-prem interfaces and on-prem services. The cloud, while wonderful from the standpoint of being able to be dynamic, does not have sophisticated services for data. And so by making it appear to be the same to the application and to the developer on-prem as in the cloud, it just makes the entire system more dynamic. It allows for companies to more easily move applications to the cloud or to another cloud or back on-prem. And it changes the dynamic and the decision-making of enterprises not to how much work do we have to do to move something to the cloud, but where is it best placed economically and based on services? We take it out of being a technology decision and make it more of an economic decision. Why are you in a unique position relative to your competition? I mean, why can't Dell EMC or NetApp or IBM sort of take that same API economy mentality and drive it through their portfolio and get to market fast and why is pure unique? Well, for one, it takes investment. We'll invest 18% of revenue in R&D this year. Nearly all of our competitors are spending less than 5%. They're really viewing storage as an old antiquated market, not as a high-tech market. They're reaping, if you will, rather than selling. And we really view storage as an extra frontier of great innovation and our competitors largely don't see that. Let's talk about a little bit digging into the evolution of your Amazon web services relationship. We talked about that a minute ago. When you guys talked about, and now it's cloud block store, there's dozens of customers in beta. Are they viewing it as this bridge to hybrid cloud and what are some of the benefits if you can talk about it from any of those customers that are in beta? What are you starting to see so far that's really exciting that this is the delivering or will be the modern data experience? You know, we had a great speaker from AWS on stage today. And I think he summed it up really well at the end of his talk. Excuse me. He said that now the migration to cloud is easy because Pure has done all the heavy lifting for you to take your enterprise applications and move them into the cloud. I mean, I think all the cloud players recognize that while they have provided some great capabilities, especially for DevOps, that the level of sophistication and the completion of services for things like very complex enterprise apps have not been fully accomplished yet. And so they recognize that experts like Pure, who have been delivering against enterprise primary tier applications for a long time have a lot to add in terms of the sophistication of our product in their environment. I think what they also recognize is that it's hard for customers to rewrite their applications to a completely different set of data APIs. And mind you, not only does, for example, AWS have different APIs in their cloud than customers have on-prem, but Azure has different APIs than Amazon. Google has yet different. And so for a customer to write their application three or four times is really beyond what is in the interest of most customers. We have taken all that heavy lifting and enabled a customer to take their application that they've already written, whether on cloud or on-prem, and to move it in those other environments with much less investment. And let me try to explain, as I understand it, and make sure I got it right, is essentially what you've done is take the Pure software stack and management framework and then using AWS services, DC2, high priority EC2s, front-ended on S3, cheap S3, created block storage that's higher availability, probably faster writes. Or reads, and writes are probably comparable. With the Pure experience. That's right. And maybe you got to pay a little bit more for that, but you get better availability and there's value there. Actually the beautiful thing is that we create an environment in AWS where it's faster, that is the storage is faster, that it has a very higher reliability, has all of the services that customers want to have, such as snapshots, replication, and encryption. And the entire bill between what they pay for Pure and what they pay for AWS is no more than what they would pay for AWS on its own for those storage services. Yeah, because you're using cheaper S3. So me, this is brilliant. AWS is happy because they're selling EC2 and S3. You're happy because you're making money on your software stack and the customer's happy because they get the Pure experience in the cloud. It's actually quite innovative. Yeah, it's almost matching. I want to quickly talk about NAND pricing. I know that was an issue this quarter. It hurt revenues a little bit and the stock dropped, but then when you saw everybody else announced the stock went back up because Pure was 28% growth to everybody else is minus 16, minus 21. Zero was the best. But to me, lower NAND pricing is an opportunity for you. It's a tailwind to go eat into more of the spending disc market. Do you see it that way? No, absolutely, right? I mean, when it all hits in one quarter, it can be a challenge. But over time, the consistent and fast decrease in NAND pricing simply means that we will eventually get the solid state for all storage. I have no doubt about that. The days of disc are certainly numbered. And what that does is open up the entire storage market. Today, disc is only by terabytes, 15% of the storage market. Flash is only 15%. So it eventually, we have 85% of the storage market still to go after. And we believe that one day that'll be all solid state. I want to ask you about the macro because you guys said on your call, you're really not concerned about the macro. You don't win on pricing. You don't lose on pricing. That even at a downturn, you guys feel like you can gain share. And I would agree with that, by the way. Of course, we don't want a downturn. Better if we don't have a downturn. But what are your thoughts on your ability to compete independent of the macro? Right. So, you know, we have, from day one, obviously we had no sales when we got started, right? So every sale we've made has always been a competitive sale. There was always someone that we had to displace, right? Some incumbent. And that speaks to the type and the quality of the sales and marketing team that we have, right? Not only are they aggressive, but, you know, in the parlance of the industry, they're hunters. I think a lot of companies, once you become more mature, you develop more farmers in your sales force, right? Managing the customer account, managing the installed base and so forth. And when the macro is flat or down, you suffer, you know, from, you suffer overall from that because you haven't been used to expanding your footprint. In our case, I think even when the macro's down, not that we won't be hurt by it, we will, but because we have a team of hunters, we continue to gain market share overall. Well, you change, it's hard to predict, right? But Frank Slutman once told me, hey, if things change, I can turn this on and we can become an ATM when he was running the service now. Right now you're going for growth. In the street, rewards growth. You got a three plus X revenue multiple. Everybody else is lucky to get one X. So they're rewarding you for growth. Do you feel like, if things change, that you might turn those knobs a little bit? Or is it, you know? So I don't expect things to change for quite some time, but we produce 70% gross margin in the last quarter, right? I mean, most of our competitors are in the 50s, right? If not the 40s. So clearly, growth costs money in this business, right? You have to build your sales force before they start producing for you. You have to invest in marketing before they start producing. And because of our high focus around R&D, right, which is all about new product, again, your front-ending, your cost before the growth actually comes in. So now we're going to continue to focus on growth. And as long as we believe that the medium to long-term growth for us is in the 30s, you know, high 20s, 30s, maybe even 40s, we're going to continue to operate profitably, but relatively lower profit. Once growth slows down, yeah, I mean, it will all start to flow into the bottom line. They're reassessing at that time. And at least our data and the ETR data shows that pure is in a position from a spending intention standpoint to continue to gain share. We don't see any change to that in the next several quarters. Last question for you, Charlie. We got to talk about AI. We talk about at every conference. When we're looking at pure and customer conversations, it's about data, right? Data is oil, lifeblood, gold, currency, whatever you want to call it. How, what is that conversation that, that say, pure and NVIDIA have together in customers about how can data ignite AI workloads, help companies identify new products, new services, deliver more automation? This is probably one of my favorite topics when I'm talking to customers, is how to make data actually useful. Not so much the, you know, the bits and bytes of, you know, how do you actually store it? But, you know, what does it mean to them as a business but also to their customers? Because a lot of times they're using it for overall customer benefit. And the great part of that conversation, and whether it's us or NVIDIA or both of us together, is we both use it for our, to improve our business and our customers' lives as well. You know, we talked today about how we have 15 petabytes of operational data from our customers' arrays, right? How they're performing. And we analyze that on a, on an hour by hour basis to look to see, is the customer getting to the point where they need, where they need to modify how they're operating or where they need to upgrade or where they need to add or even reduce more capacity so that they don't fall, you know, they don't trip over things that will get their business in trouble. So it, and now we even allow the customer to analyze their business and do what if scenario planning to say, well, if I'm going to double the amount of customer transactions I have, you know, what will that mean from an infrastructure standpoint? You know, will I need to change or upgrade? So, you know, this has been great fun because we are in the same boat as our customers depending on AI to improve our, our mutual customers' experience. Well, those conversations must be very insightful. Charlie, thank you for joining David and me on theCUBE today. Again, happy 10th anniversary to Pure. We look forward to the next two days. And happy 10th year to you as well. Thank you. Thanks very much. I appreciate it. That's right. For Dave Vellante, I'm Lisa Martin. You're watching theCUBE from Pure Accelerate 19.