 From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hello everybody and welcome to this week's CUBE Insights powered by ETR. In this breaking analysis, well first I'm coming to you from the floor of Cisco Live Barcelona and I want to talk about storage. Storage continues to be soft but there are some bright spots. I've been reporting on this for a while now and I want to dig in and share with you some of the reasons why, maybe give you some forecasts as to what I think is going to happen in the coming months and of course I want to look into some of the ETR spending data and try to parse through that and understand who's winning, who's losing, who's got the momentum, where the tail wins and head wins. So the first thing I want to show you is let's get right into it. What this slide is showing here is a storage spending snapshot of NetScore. Now remember NetScore in the ETR parlance is an indicator of momentum or spending velocity. Essentially every quarter what ETR does is they go out to in this case 1100 respondents out of the 4,500 data set and they ask them are you spending more or are you spending less? And essentially they subtract the less from the more and that constitutes NetScore. It's not that simple but for this purpose that's what we're showing. Now you can see here on the left hand side we're showing all respondents out of 1161 and you see the January survey NetScore is you got Rubrik, Cohesity, Nutanix and Pure and VMware vSAN at the top five. So Rubrik and Cohesity very, very strong. Interesting Rubrik was very strong last quarter. Cohesity not as strong but really shooting up. It kind of surprised me last quarter Cohesity being a little low but they were early into the data set and now they're starting to show what I think is really happening in the marketplace. So that's a good indicator but you can see 75%, 72%. Nutanix still very strong at 56% driving that hyper-converged piece. You see Pure Storage at 44% down a little bit talk a little bit more about that in a moment VMware vSAN, Veeam, et cetera down the list. The thing about the left hand side and storage in general you can see the softness only about one third of the suppliers are in the green. And that's a problem if you compare this to security probably three quarters are in the green. It's a much, much hotter segment. Now look on the right hand side on the right hand side I'm showing what ETR calls GPP, giant public and private. You can see there's an N of 403. These are large, the largest, the very largest public and private companies private company being a company like Mars Candy. And they say that they're the best indicators of spending momentum in the data set. So really isolating on some of the large companies. Look what happens here. You can see Rubrik gets even stronger as does Cohesity. They're into the 80% range. I mean that's really rarefied air. So very, very strong. You can see Nutanix drops down. So it does better in the smaller companies it appears. They drop down to 41%. Pure gets stronger in the GPP at 68%. You can see vSAN VMware vSAN up tick to 45%. Nimble gets better. HPE's nimble to 54%. Dell drops down to 4.8%. HPE goes up to 33%. HPE was red in the left hand side. You can see Veeam drops. Not surprising. Veeam in the biggest companies is not going to be as prevalent. We talked about that in our breaking analysis segment after the acquisition of Veeam. And you can see NetApp bumps up a little bit. But it's still kind of in that red zone. I also want to call your attention to Actifio. They're way, way down the bottom in the left hand side, which kind of surprised me. And then I started digging into it because I know Actifio does better in the larger companies. And in the right hand side, they pop up to 33%. It's only an end of three. But what I'm seeing in the marketplace is Actifio solving some really hard problems in database and copy data management. So you're starting to see those results as well. But generally speaking, this picture is not great for storage with the exception of a few players like Rubrik, Cohesity, Pure, Nutanix. And I'm going to get into that a little bit and try to explain what's going on here. The market's bifurcated. Primary storage has been in the back burner for a while now. And I've been talking about that. You know, the one exception to that has really been Pure. Little bit for Dell EMC coming back, but really, we'll dig into that a little bit more, but Pure has been the standout. And they're even moderating lately. I'll talk about that some more. Secondary storage is where the market momentum is. And you can see that with Rubrik and Cohesity. And again, we'll talk about that some more. Let me dig into the primary side. Cloud, as I've talked about in many breaking analysis segments, is siphoning off demand from on-prem spend. The second big factor in storage has been there was such an injection of flash into the marketplace, it added headroom. Customers used to buy spindles to get performance. And they don't need to do that so much anymore because so much flash was pushed into the system. The third thing is you're still seeing in primary, the consolidation dynamics play out with hyperconverge. So hyperconverged is the software defined bringing together of storage, compute, and networking into a single, logical, managed unit. And that is taking share away from traditional primary storage. You're also seeing tactical NAND pricing be problematic for storage suppliers. You saw that with Pure again this past quarter. NAND pricing comes down, which you think would be a good thing for components standpoint, but it also lowers prices of the systems. So that hurt Pure's revenue. Their unit volume was pretty good, but you're seeing that sort of put pressure on prices so ASPs are down, average system prices. Let's turn our attention to the secondary market for a moment. Huge injection of venture capital, like a billion dollars for half a billion dollars over the last year. And then another five billion just spent on the acquisition of Veeam. So a lot of action going on there. You see big TAM expansions where companies like Rubrik and Cohesity who have garnered much of that VC spending are really expanding the notion of data protection from backup into data management, into analytics, into security, and things of that nature. So a much, much bigger emphasis on TAM expansion, of course, as I talked about the M&A. All right, so now let's dig into each of these segments. The chart that I'm showing now really digs into primary storage. And you can see here the big players, Pure, Dell EMC, HPE, NetApp, and IBM. And look it, there's only one company in the green, Pure. And you can see they're trending down just a little bit from previous quarters, but still far and away the company with most spending momentum. Again, here I'm showing net score, measure of spending velocity. Back to the January 18th survey. You can see Dell EMC sort of fell and it is slowly coming back up. NetApp hanging in there, kind of Dell EMC, HPE, and NetApp kind of converging. And you can see IBM. IBM announced last quarter about 3% growth. I talked about that actually in September. I predicted that IBM storage would have growth because they synchronized their DS8000 high-end mainframe announcement. To the Z15, so you saw a little bit of uptake in IBM. Pure, as I said, 15% growth. I mean, if you're flat in this market or growing at 3%, you're doing pretty well. You're probably a share-gainer. And we'll see what happens in February when Dell EMC, HPE, and NetApp announce earnings. We'll update you at that time. But so that's what you're seeing now. It's the same story. Pure outpacing the others, everybody else fighting for share. Let's turn our attention now to secondary storage. What I'm showing here is net score for the secondary storage players. I can't isolate on a drill down for secondary storage. Last slide I could do on storage overall. But what I can show is pure plays. So what we're showing here is rubric, Cohesity, Veeam, Commvault, and Veritas. You have five pure play, you can argue Veritas isn't a pure play, but I consider them a pure play data protection vendor. Look at rubric and Cohesity. Really shooting up to the right. 75% and 72% net scores respectively. You see Veeam hanging in there. And this is again all respondents, the full 1100 data set. Commvault announced last quarter it beat earnings, but it's not growing. So you can see some pressure there and you can see Veritas under some pressure as well. And you can see a net score really deep in the red. So that's cause for some concern. We'll keep watching that, maybe dig into some of the larger accounts to see how they're doing there. But you can see clear standouts with rubric and Cohesity. I wanna look at hyperconverge now. Again, I can't drill into hyperconverge, but what I can do is show some of the pure plays. So what this slide shows is the net score for some of the pure play hyperconverge vendors led by Nutanix. The relative newcomer here is Veeam with Veeamware. And you can see Dell, EMC, VxRail, and SimpliVity. I would say this. A lot of the marketing push that you hear from out of Dell and out of Veeamware says, Nutanix is in big trouble, they're dying and so forth. Our data definitely shows something different. The one caution is you can see Nutanix in larger accounts, not as strong. So, and you can see both VSAN and Dell EMC stronger in those larger accounts. So maybe that's kind of their bias in their observation space, but it's something that we've got to watch. But you can see the net scores here. Everybody's in the green because overall, this is a strong market. Everybody is winning, it's taking share, as I said, from primary. So we're watching that very closely. Nutanix continues to be strong, watching very carefully that competitive dynamic and the dynamics within those larger companies which are Bellwether. Now the big question that I want to ask here is can storage reverse the 10 year trend of the big cloud sucking sound that we have heard for the past decade? I've been reporting with data on how cloud generally has heard that storage spend on prem. So what I'm showing here in this slide is the net score for the cloud spenders, many hundreds of cloud spenders in the dataset. And what we're showing here is the net score, the spending velocity over the last 10 years for the leaders. And you can see Dell EMC, the number one net app right there in terms of market share, IBM as well. I didn't show HPE because the slide got too busy but they'd be up there as well. So these are the big spenders, big on-prem players and you can see, well, it's up and down, the highs are lower and the lows tend to be lower. You can see in the latest surveys, maybe there's some upticks here and some of the companies. But generally speaking, the trend has been down, that siphoning away of demand from the cloud guys. So can that be reversed? And that's something that we're going to watch. So keeping an eye on that, let me kind of summarize and I'll make some other comments here. One of the things we're going to watch here is Dell EMC net app and HPE earnings announcements in February, that's going to be a clear indicator. We'll look for what's happening with overall demand, what the growth trajectory looks like and very importantly, what NAND pricing looks like. As a corollary to that, we're going to be watching elasticity. I firmly believe as prices go down, that more storage is going to be bought. That's always been the case. Flash is still only about 20, 25, 30% of the market. About 30% of the spending, about 20% of the terabytes. But as prices come down, expect people to buy more. That's always been the case whether there's any elasticity to demand. It hasn't shown up in the earnings statements and that's a bit of a concern, but we'll keep an eye on that. We're also going to watch the cloud siphoning demand from on-prem spend. Can the big players and guys like Pure and others, new startups maybe reverse that trend? Multi-cloud is an opportunity for these guys. Multi-cloud management, TAM expansion into new areas, actually delivering services in the cloud. You saw Pure announce a block storage in the cloud. So that's kind of interesting that we'll watch. Other players may be getting it to the data protection space, but as it relates to the cloud, one of the things I'm watching very closely is the TAM expansion of the cloud players. What do I mean by that? Late last year, Amazon announced a broader set of products or services really in its portfolio. So let's watch for Amazon's moves and other big cloud players into the storage space. I fully expect they're going to want to get a bigger piece of that pie. Remember, much if not most of Amazon's AWS's revenue comes from compute. They really haven't awakened to the great storage opportunity that's out there. Why is that important? Look, you saw this play out on-prem. Servers became a really tough market. Intel made all the money. Amazon is a huge customer of Intel and Intel is getting a big piece of Amazon's EC2 business. That's why you see in part, Amazon getting into its own chip design. I mean, in the server business, you're talking about a low gross margin business. You know, if you're in the 20s or low 30s, you're thrilled. Storage, pure last quarter had 70 plus percent gross margins. It's been a 60 plus percent gross margin business consistently, so you're going to see the cloud guys wake up to that and try to grab even more share. It's going to be interesting to see how the traditional on-prem vendors respond to that. Coming into last decade, you saw tons of startups, but only two companies really reached escape velocity. Nutanix and Pure. At the beginning of the century, you saw Data Domain, Isilon, Compellant, 3PAR all went public. Equalogic and Left Hand got taken out. There are a bunch of other companies that got acquired. Storage was really a great market. Coming into this decade, mid part of the decade, you had lots of VC opportunities here. You had Fusion and Violin and Tintry went public. They all flamed out. You had a big acquisition with Solid Fire, almost a billion dollars, but really Pure and Nutanix were the only ones to make it. So the question is, are you going to see anyone reach escape velocity in the next decade and where's that going to come from? The likely players today would be Cohesity and Rubrik. Those unicorns would be the opportunity. You could argue Veeam, I guess, reached it, but hard to tell because Veeam is a private company. So by escape velocity, we're talking large companies who go public, have a big exit in the public market and become transparent so we really know what's going on there. Will they come from a cloud or a cloud native play? We'll see. Are there others that might emerge? Like a Nebulon or a Clumio? You know, a company like Infinidat's doing well? Will they hit escape velocity and do an IPO and again become more transparent? That's again something that we're watching, but you're clearly seeing moves up the stack where there's a lot more emphasis than spending on cloud, cloud native. We clearly saw it with hyperconverged consolidation, but up the stack toward the apps, really driving digital transformations. People want to spend less on heavy lifting like storage. They're always going to need storage, but is it going to be the same type of market it has been for the last 30 or 40 years are great investment opportunities. We're starting to see that way, but we'll keep track of it. So thank you for watching this breaking analysis Cube Insights, powered by ETR. This is Dave Vellante. We'll see you next time.