 from Seattle, Washington. It's theCUBE, covering KubeCon and CloudNativeCon North America 2018. Brought to you by Red Hat, the CloudNative Computing Foundation and its ecosystem partners. Okay, welcome back everyone. We're live here in Seattle. It's theCUBE's coverage of KubeCon, CloudNativeCon and part of the CNCF CloudNative Computing Foundation. The rise of Kubernetes, this is what the show's all about, three days of wall-to-wall coverage. We've been there from the beginning, covering this KubeCon effort from the beginning. I'm John Furrier with Stu Miniman. We're here to analyze and break down the event with our guest analysts for the segment, Steve Herrod. Kube alumni, he was there. The first day we ever did theCUBE in 2010 has been a good friend of theCUBE. Now he's a venture capitalist managing director at General Catalyst, premier VC in the industry. Steve, great to see you. Good to be here. It feels like the early days of some of the other conferences too, doesn't it? It feels like AWS, seven, eight years ago where it tips over, there's a tipping point, we seem to see that doubling. So it's kind of that tipping point where there's more demand for theCUBE and we can fill it, so it's great content. But it's a bigger picture and I want to break through that. I want to get your thoughts and let's have a shared conversation around what's really going on here. You're talking about a disruption in the industry with cloud computing. You got Amazon, just a freight train, just taking all the beach, the wave is coming in this is an opportunity, in my opinion, the industry to kind of say, hey, it's a multi-cloud world so you're not going to take all of it. Yeah, Google, you got Microsoft, you got startups. This is a way to create an open source way to fill the gap. Your thoughts, you agree? I totally agree and I think what's interesting, this conference does not have a corporate, like at least an explicit corporate sponsor. It has four or five that are all trying to have their play in it. Microsoft's not one of them, which is sort of interesting. But it was, I think a very bold thing this year to have this big of a venue and invite this many people and then hope that you're going to get the sponsorships and all the other stuff that follows. In Seattle. In Seattle, yeah, our weather is a little bit interesting. But just to your point, I do think this is really interesting because it is more open than a lot of these conferences where people are coming together, both open source but also so much focus on how do you do functions in a way that works across places? How do you do service meshes? Like everything is, it's both good and bad because there's so many choices that people are being seen right now. You were the CTO of VMware. Stu, you worked in the CTO office at EMC back in the day. You're seeing a systems kind of vibe going on in cloud and you got application renaissance kind of almost like the app server days. Think web sphere or whatever that movement in the 90s and 2000s that kind of grew quickly. All kind of being modernized. So you have cloud scale. AI has been around for a long time because of the cloud as a renaissance. Video's been around for a long time but because of the cloud, things like theCUBE is happening. So the cloud is enabling a rebirth of a lot of things and enabling a lot of new things. How do you guys view that systems view application renaissance? Jassy talks about it at re-invent as a new kind of persona developing. As a buyer and IT investments are changing, you're making startup investments. It's crazy. What do you think? Yeah, so first of all, John, I like what you're saying about that systems view because too often we kind of focus on a specific tool. So virtualization was great but big thing, I took a bunch of servers, I made it smaller servers but I took the same old application and I shoved it in there and I left it running for another five or 10 years when I probably should have modernized it. Today, we just had Cheryl on talking about the ecosystem and customers and what I want to focus on is how the users get value. What are we building on top of this? Not the next cool thing to build but how do I run my business? How do I do cool things with Genomics? How do I improve healthcare? And in many ways, we're seeing some of these top down things. I mean, what's gotten me so excited about things like serverless and been really poking and teasing it how that fits in with this ecosystem is it's not just about a way to kind of turn the crank on making things a little bit more efficient or get, I can manage more machines with fewer people but it moves up thing. And for someone like myself who I'm a networking guy with an infrastructure background it's a little out of my comfort zone and that's okay. We talked to Lou Tucker. Lou's really excited about where AI is going and what's there. So I think we're in a real renaissance here and it's a big influence. Well, I think to your point, what's interesting, whenever I do a teacher course to college or when I'm talking to startups or even in the old days, it's really easy to forget that infrastructure is not a thing in its own right. It's solely there to enable applications and to enable other things. So whenever you get really deep in the weeds on this is a new security model for this type of container or this, it's important and you're thinking about the best way to do it but you really, right, you have to abstract it out to can I ship value faster? Can I save customers money? Can I do something safer? You really have to think about it in that context and thus there's so much activity here. You have to really make sure you're thinking about where it all fits together. And you know, the computer science conversation changes too, the nature of what is computer science is evolving. And I want to get to that in the next kind of discussion point but I want to just Steve ask you, you know, you were on the VMware side when VMware kind of entered in with virtualization, it was a desktop, it was app, it was like you loaded it on a machine and then that ended up transforming a massive industry. And so a lot of people compare what VMware did in its growth and its impact but saying the cloud has got certainly more orders of magnitude, you mentioned security. How is, where's the VMware moment in this cloud transformation impact? I mean, your thoughts there, because you've been on both sides, one as a driver of CTO at VMware and now as an investor. Where do you see cloud? I've kind of thought of it as two different angles. One is appealing to developers and then that taking you all the way through operations which is, I mean that is DevOps is sort of looking at that. VMware's first product was a workstation product that made developers have a bunch of environments right in front of them. And we always had a vision for getting into the operations center but we knew we had to kind of come up through that path. And I think likewise a lot of this tooling that we see here is developer first and it's them saying I like this tool and I can make my job be more enjoyable this way. But what you're really seeing, especially at this one is how do you start in the developer tools and then not be detested by developers but then actually be paid for by the operation side. And so if you look at the type of vendors that are here you start having venture capitalists here. You have a few people wearing suits here. It is about making this more enterprisey, more production ready. And that's kind of the natural progression of any major impact like this. And Heptio certainly, Stu was reporting earlier the number was embedded in the filing of an EM where a half a billion dollar acquisition for talent and a position in the marketplace. There's liquidity. So there's investment opportunities. We talked to Jerry Chan about this at AWS and one of the gear thoughts. How is the investment thesis going on? Because what are you investing in this? The notion of a stack is kind of transformed into Lego blocks and services. So the notion of a stack is kind of changing although people say, I've heard people say the Kubernetes stack. I'm like, well, what does that mean? Which one? So there's a lot of kind of stack derivatives. But how do you invest in this? What are you looking for? Where is the value? Where are you sniffing out the deals? Where's the white spaces? And where should entrepreneurs go? Yeah, and I have several companies presenting here. So I've certainly done in some investments around the space. But I focus on a few things very specifically. I've been around this a little while. I really like to think about not tools that go to the new hot new companies. I really try to think about what is more mainstream company going to adopt? And that usually means a few things. It has to have enterprise capabilities. It has to fit into the rest of the things. But I look at like how are you going to digest this with your other tools and the other processes that you have in place? So if it's a security solution, I look at, I don't want really something that only protects the brave new world. I want it to fit in somehow with security policies and other things that are happening. So mainstream adoption, IT kind of impact? I like a tool that actually works across environments and lets you go from here to there. You have talked to Elumio several times. They're trying to do micro segmentation for physical machines all the way through containers. The other thing I'm keeping a close eye on is this is chaos in terms of the number of startups doing very specific point solutions. And you have to really think about how does that grow into a big enough chunk of a budget or a big enough problem? So every single time I make an investment I ask how does this do something 10 times better than something else? And is that important to the company? And that's really hard to answer sometimes. Yeah, Tosti, and what's your take on the kind of open source, open core business model today? To be honest, I go around, I talk to some of the founders there and everybody wants to contribute to open source, but maybe I don't want to build a business around it because actually monetizing that is really tough. Is it just, I look for to get acquired by one of the big players here or can I actually build a business with open source? That's literally the billion dollar question. But I do think, like on the positive side the number of exits are big things recently with Magento, with Cloudera doing great, with obviously Red Hat. But we've seen in MuleSoft a lot of big acquisitions and some good IPOs, but on the flip side you definitely have to think about it differently now. There's a growing license that is very careful about allowing clouds to host your open source project without contributing back. Hopefully that'll allow this hosted model to play out. But I personally, I certainly look to open source, you can see what's going on from traction. But when you see it as a great lead generation engine which it often is for folks, I think that's a really healthy way to avoid spending a bunch of marketing money. Yeah, it's been fun. A lot of different shows we go to. Love your analysis, thanks for coming on, appreciate it. Just in general, as not a VC, but as a tech person and in the industry, I want to ask you and Stu, where's the, what wave are we on? I mean obviously Kubernetes is now kind of front and center, but we still got cloud native. Is it cloud, you got IoT and Amazon re-invent, we saw a lot of conversations around Edge. They had some interesting announcements around satellite telemetry coming in to regions. So you got Google, you got Microsoft, you got the big players. Is it, the rich get richer? Is there going to be a new second tier cloud service provider? Where is this going? How is it going to reshape the industry? I mean just big picture, what's your thoughts? This is literally what I get paid to do is figure out where things are headed. I'd say just at a top level, this is a super fun time to be in this lower level of the stack. You mentioned already AI gets, it's sort of AI washing goes on a lot right now, but the very core of it is literally changing every application in interesting ways. And for me, I was a former hardware designer. The fact that you can now build and have really cool new hardware that's accelerating this stuff is really exciting. You saw Amazon's announcements, not only an ARM based server, but Inferentia chips. Google's been doing this with TPUs. 100 gig networking in there, like high speed, it's a cluster configuration, it's amazing stuff. So I love the fact that we can actually have very big innovation at each stage of the stack and it's because the combination of every company becoming an app, digital company, coupled with the power of AI to transform things means you need DevOps to be faster, you need these platforms that let you do more self-service. And then I just sprinkle on top of that is just the ridiculous demand for high quality engineers. And if you don't give them an environment where they feel productive, they're just not going to stay at your company. And so all that mix comes together. I don't think they're going to be, they'll be some giant companies that already are, but I think the ability to create a new company that becomes large quickly, or becomes small quickly if you screw up, is bigger than ever. It's total acceleration. Everything's faster. Values accelerate, but it's also failure too, right? Exactly. Everything is accelerating. You have an option to abandon in your NPV calculations and IRRs in your portfolio. Exactly. The word pivot comes from... Everything is faster, that's the right way. What's your take on it? Yeah, so we're an interesting point in the industry. It's a bit of a paradox. On the one hand, the challenge of our time, we've been talking on theCUBE since the early days, John, is it's about distributed architectures and we're decomposing all of the pieces. Even Kubernetes itself, we're going to talk about how decomposing. On the other hand, everything's consolidating. I've seen more vertical stack integration from the chip and hardware level all the way through. You see Apple, Microsoft, Google, and Amazon all have chip companies and they're doing really interesting stuff there, but it is such a complex individual that no one company can do it all. So there is opportunity for people to build on top of that. We have new marketplaces. We have new ways of doing it. So, yes, there's going to be some really big winners and we have seen changes, but there are still opportunities and yeah, John, it keeps us busy always. Here's my take, here's my take. I want to get you guys' reactions to my video on this. So obviously we're in the media business. We're disrupting media with theCUBE. So we look at the market and it's kind of matched the music industry. The power curve, the power law is very flat and straight and then a very long tail and with the head of the power law is the big players. But then when media came out, it kind of created a fatter tail and a bigger torso. I think that I see in the cloud, I see the rich getting richer. Amazon, Google, Microsoft, Alibaba, and maybe a couple of players underneath there, IBM, Oracle, those big guys. And then it's going to be a second tier of cloud service provider, someone who's going to package all these awesome sets of features in the long tail. So you're going to start to see a growth because the big guys cannot be winning all the mid-range business. I think, you're right. I think there's going to be a lot of solutions that are just exceptional. And I think the scale of the cloud is going to create an opportunity for new kinds of service providers. Someone who says, hey, you know what? I'm going to package this differently. I'm going to assemble a cloud solution on either one or all the clouds. Why wouldn't I use the accelerated Amazon or the power of Google? I think that's well thought. And I do think, we've talked about this for a while too, but I do believe there's going to be specialization by industry where you have certain algorithms and data that's unique to it, by geography. There's still going to be sovereignty issues, even by just like what type of things am I trying to build? So I do think simultaneously there's commonality on the platform, but that allows you to do specialization and to really serve a specific industry quite well. And machine learning is a great specialty thing. The metadata to power machine learning. So Steve, you have any further questions you want to ask us before we run out of time? Well, I would just say, I mean, you see a lot of these conferences. I actually like to show up at these and say what point in time does this look like the AWS reinvent for me? What point in time does this look like the maybe the VMware event in my case? But I don't know, this feels to me like we've jumped over, we're sort of at that point where this is going to keep going and growing for the foreseeable future. How do we make sure we've hit the inflection point but not jump the chart? Yeah, I mean, do you think we are here? And do you think, how does this feel versus some of the other events that you spend time on? Yeah, I mean, John, you want me to, so my take first of all is there's a little worry and there's some concern of us that have been through this before is like, wait, did we just create another open stack? And you know, my resounding answer so far is no. While there might be 35 main projects here, each one of those was started for a reason. They stand on their loan. We've got Matt Klein on from Lyft as our next guest here. And Envoy, if Kubernetes didn't exist, Envoy would probably still exist. So there's a lot of these pieces that are good but it is complicated. It is very complicated. All these pieces, but that's a real opportunity for a lot of companies. The SI is the big platforms to be able to help put this together and the customers are thrilled with what's going on. So there's interesting things there. This ecosystem, the only ecosystem I've seen probably grow faster is the Amazon one. So it is doing well and we've been looking for years as to like a nice vendor independent ecosystem to grow because some of the ones in the storage industry and things like that all died. So there were vendor shows and the Linux foundation's done a nice job. We bet early on it. Well, we bet early on it was a good bet but here's the challenge that they have. They have lightning in a bottle and it's definitely arrived. So there's a little bit of jump to shark moment. You got some things happening that's kind of glam oriented but absolutely it's arrived. I think the challenge that they have is open source community is a core constituency of this event and the Linux foundation is structured to be kind of a very tight top, thin at the top pyramid of management and this scale of this event and this movement is too big for them. I think the handle, I think that either you have to have a sub brand or start segmenting out because if they lose the open source community then they're going to lose the vibe of the event and that's the core of what it is. The downstream benefits kind of an open source parlance is the IT impact and the developer impact and inherent in that is the business benefits. So you're going to start to see more suits coming in and you're going to start to have a melting pot and that is a risky proposition if they don't get out front on that. So yes, it's arrived but there's so much time that can be devoted just to the projects, just to the innovation. You're going to have to wear hoodies next time. There's a money making aspect of it. Yes, the money making aspect of this is huge and I think that's what we're watching as the business people come in saying, look, this is billions and billions of dollars. Maybe just one more thought on that. I like that the notion is really important. This is a distributed not really owned by one person, one company and there's the chaos that comes with that and so how do you do the balance between these two things? It's like when Amazon announced their blockchain thing it's like blockchain is supposed to be distributed and now we have a company running it in one cloud. It's like that balance between the push and pull of centralization that we're going to see. We'll have to put some computer science architecture together and maybe put an operating system around it. Fresh from DevOps, Steve, thanks for coming on theCUBE. Great to have you on as a guest panel. It's great to see you. Legend in the industry, Steve Herrick, CUBE alumni from 2010, been on every year now at Venture Capital as former CTO of VMware with Stu Miniman. I'm John Furrier, analysis of CUBECon. Stay with us for more coverage after this short break.