 From our studios, in the heart of Silicon Valley, Palo Alto, California, this is a CUBE Conversation. Hello everyone, welcome to this special CUBE Conversation here in Palo Alto, California, CUBE Studios. John Furrier, your host, this CUBE Conversation with D. Raj Pandey, CEO of Nutanix. CUBE alumni, a very special part of our community. Great to see you again. Thanks for coming in, previewing your big show coming up, Nutanix, next in Europe. Thanks for joining me. It's an honor. So it's always great to get you. So your interview on Bloomberg with Emily Chang, kind of short interview, but still, you would put in the message out there, you've been talking software, we covered your show here in North America, clearly moving to the subscription model. And I want to get into that conversation. I think there's some notable things to talk about now that we're in this cloud 2.0 era, as we're calling it, kind of a goof on web 2.0. But cloud 2.0 is a whole shift happening and you've been on it for a while. But you got the event coming up in Europe, Nutanix, next, what's the focus? Give a quick plug for that event. Let's talk about that. Yeah, in fact, the reiteration of the message is a key part of any of our user conferences. We have 14,000 customers around the world now across 150 countries. We've done almost more than $5 billion worth of just software business. In the last six, seven years of selling, it's a billion six run rate. There's a lot going on in the business, but we need to take a step back in our user conferences to talk about the vision. So what's the vision of Nutanix? And the best part is that it hasn't changed. It's basically one of those timeless things that hopefully will withstand the test of time in the future as well. Make computing invisible anywhere. So people scratch their heads. What does computing mean? What does invisible mean? What does anywhere mean? And that's where we'll actually go to these user conferences to talk about, like what is computing for us? Is it just infrastructure? Infrastructure and platform. Now that we're getting into desktop delivery, is it also about business users and applications? And the same thing about invisible, like what's invisible? For us, it's always been a special word. It's a very esthetic word. If you think about the B2B world, it doesn't talk about the word invisible a lot. But for us, it's a very profound word. It's about autonomous software. It's about continuous virtues of continuous delivery. Continuous consumption, continuous mobility. That's how you make things invisible. And subscription is a big part of that. Continuous delivery message and continuous consumption. So the event is October 9th, around the first week of October. You got some time there, but getting geared up for that. I want to ask you what you've learned from the North America conference and going into the European conference. I mean, it's ultimately the same message, the same vision with a tweak. It's some time under your belt since then. The subscription model business, which you were talking in your Bloomberg interview, is in play. It's not a new thing. It's been in operation for a while. Could you talk about that specifically? Because I think most people would say, hey, hardware to software, hard to do. Software subscription, hard to maintain and grow. Where are you on that transition? Explain and clarify your mix of business, hardware, software. Where are you in the progress of that transformation? I have been a big student of history and I can't think of a company that's gone from hardware to software and software to subscription in such a short span. Actually, I don't know of any company. If you know of one, please let me know. But why? The why of subscription is to be frictionless. Hybrid is impossible without having the same kind of consumption model, both on-prem and off-prem. And if we didn't go through that, you'd be hypocritical as a company to talk about cloud and hybrid itself. The next 10 years for this company is about hybrid. And doing it as if private and public are one and the same is basically the essence of Nutanix's architecture. Well, I can think of some hardware, software dynamics. So again, not the, might not match your criteria, but some might say Apple is at a software hardware company. Hardware drives the ecosystem. They commoditize it. Peloton bicycle is a bike. It's mainly a software business and a person in business. So there's different models. Oracle has hardware. They have software. So it doesn't always relate to the enterprise. What's the argument to say, hey, you want to just create your own box and kick ass with that box and build an eco, or is it just different dynamics? What's that? Well, there's a tension in the system. I mean, people want to buy experiences as opposed to buying things. They don't want to integrate things like, oh, I need to actually now get a hardware vendor to behave with a software vendor when it comes to support issues and such. And at the same time, you want to be flexible and portable. So how do you really work with the customer, with their relationships that they have with their hardware vendors? So the word anywhere in our vision is exactly that. It's like, okay, we can work on multiple servers, multiple hypervisors, and multiple clouds. At the end of the day, the customer experiences is king. And that's one thing that at the last 10 years has taught us, John, if anything, is don't sell things to people. You know, Kubernetes is a thing. Cloud is a thing. Can you really go sell experiences? The biggest lesson in the last year for us has been integrate better. And not just with partners, but also within your own products. And now if you can do that well, customers will buy from you. I think you just kind of clarify kind of where I was thinking out loud, because if you think about Apple, the hardware is part of the experience. So they have to have it. You don't have to have the hardware to create those experiences, is that right? Absolutely, which is why it's now two percent of our business. And yet, we are saying that we'll take the burden of responsibility of supporting it, you know, integrating with it. Like one of the biggest issues with cloud is operations. What is operations? It's day two patching. How do you do day two patching? Intel is coming up with microcode upgrades every quarter now because of security reasons. If we are not doing an awesome job of a one-click upgrade of firmware and microcode and BIOS, we don't belong in the hybrid cloud world. See, that's the level of mundaneness that we've gotten to with our software that makes us such a high-end PS company with our customers. I want to just drill in on the notion of a thing versus experience. You mentioned Kubernetes is a thing. I would say Hadoop was a thing. But Hadoop was a great example. It's hard to do. Kubernetes, Jerry Stila, people love Kubernetes. We'll see how that goes. If it can be abstracted away, it's not a thing anymore, we'll see. But Hadoop was a great example. Unbelievable technology direction, big data, all the goodness of object storage, unstructured data, we knew that. Just hard to work with. I was setting up clusters, managing clusters, and it ended up being the death of the sector, in my opinion. So what is an experience to find what does that mean? Is it frictionless only? Is there a trust equation? Just unpack your vision on what that means. A thing, which could be a box with software on it. An experience which is something different. Yeah, I mean now you start to unpeel the word experience. It's really about being frictionless, trusted, and invisible. If you can really do these things well around the word, like define frictionless, well it has to be consumer grade. It has to be web-scale, because customers are looking for the Amazon architecture inside, not just going and renting it from Amazon, but also saying can I get the same experience inside. So you've got to make it web-scale, you've got to make it consumer grade, because our operators, our end users, talk about Hadoop. I mean they struggled with the experience of Hadoop itself, because it was the thing, it was the technology as opposed to being something that was consumer grade itself. And then finally security, trust is very important. Secure, always on, resilient. The word resilience is very important. In fact, that's one of the things we'll actually talk about at our conference is resilience. What does it mean, not just for Nutanix talk to be where it is today, from where it was six months ago? And that's what I'm most proud of is, like you go through these transitions, you actually talk about resilience of software, resilience of systems, resilience of customer support, and resilience of companies. So you mentioned hybrid cloud, we were talking before we came on camera about hybrid cloud with software as a two-way relationship. Talk about what you mean by that. Now then I want to ask you a follow-up question of, where hardware may or may be an opportunity or a problem in that construct? Yeah, I mean look, in the world of hybrid, what's really important is delivering an experience that's really without silos. I mean, ideally an on-prem infrastructure is an availability zone. How do you make it look like an availability zone that can stand up shoulder to shoulder with a public cloud availability zone? That's where you sell an experience. That's how you talk about a management plane where you can actually have a single pane of glass that really delivers a cloud experience both ways. You know, it's kind of a contrarian. I always love interviewing because you seem to be on the next wave before anyone realizes it. Right now everyone's trying to go on-premise and you're moving from on-premise to the cloud. Not you guys moving, but your whole vision is. You've been there, done that on-premises. Now you've got to be where the customers are which is where they need to be, which is the cloud. I heard you say that. So it's interesting, you're going the other way. But you can look at the infrastructure and say, hey, there's a lot of hardware inside these clouds that have a lot of hardware-specific features like hardware assist that software or network latency might not be able to deliver. So is that a missed opportunity for you guys or does your software leverage these trends? And even on-premises, there's hardware offload like features coming. How do you reconcile that? Because I would argue inside of the company, say hey, G-Rod, let's not go all in on software. We can maximize this new technology, this thing, for our software. How do you- Look, I think if you look at our features like security, the way we use TPM, which is a piece of assist that you get from Intel's motherboards for doing key encryption management. What does it mean to really do encryption at scale using Intel's vector instructions? How do you do RDMA? How do you look at InfiniBand? How do you look at Optane Drives? We have been really good at that lowest level, but making sure that it's actually selling a solution that can then go drive SAP HANA and Oracle Databases and GPU for graphics and desktops. So as a company, we don't talk about those things because they are the how of the business. And you don't talk about the how, you'd rather talk about the why and the what, actually. So from a business strategy standpoint, I just want to get this clear because this downfalls for getting into the hardware because you know them. Inventory all these hardware cycles are moving fast. You mentioned Intel shipping microcode for security reasons. So you're basically saying you'd rather optimize for decoupling hardware from the software and ride the innovation of the hardware guys like NVIDIA and Intel and others. Absolutely. And do it faster than anybody else, but more integrated than anybody else. You know, all together now is kind of a message for dot next. How do you bring it all together? Because the world is struggling with things and that's the opportunity for Nutanix. Well, I would say making compute invisible is a great tagline. I would add storage and networking to that too. Yeah, computing by the way. Computing. I said computing. Computing is compute storage networking. Computing is infrastructure platform and apps. It's a very clever word because it's a very profound word as well. Let's just throw Kubernetes in there too and move up the stack because ultimately we're seeing we're writing a lot of stories on cover this editorially is that the world's flipped upside down. It used to be the infrastructure. We're calling this cloud 2.0 as I said earlier. The world used to be the infrastructure enabled what the apps could do. And they were limited to the resources they had. Now the apps are in charge. They're dictating terms below the software line if you want to call it the app. So the apps are in charge now. Whoever can serve up the best infrastructure capability which changes the entire computing industry because now the suppliers who can deliver that elastic or flexible capacity or resource wins. Absolutely. And that's ultimately a complete shift. You know I tell people John about the strategy of Nutanix because we have some apps now. Frame is an app for us. You know Beam is an app, Com is an app. These are apps that run on the platform which is the core platform Nutanix. The core hyperconvergence innovation that we did. If you go back to the 90s who used to say that windows really fueled office or office fueled windows. They had to work in conjunction because without one there would be no, you know the other actually you know. So without office there'd be no windows. Without windows there'd be no office. How platforms and apps work with each other synergistically is at the core of delivering that experience. I want to add just your student of history as an entrepreneur you've been there through the many ways and you also invest a lot now and ask this question. It used to be that platforms was the holy grail. You go to a VC and say, hey I'm building a platform. Big time investment, an entrepreneur came back. I got a tool, you're a feature. You're a feature, not a platform. Platforms were was the elite engineering position to come in and look for the big money. How would you define platforms now? Because with cloud if apps are in charge and there's potential features that are coming around the corner that no one's yet invented. What does this platform 2.0 kind of world look like if you were coming out of grad school or you were a young engineer or young entrepreneur. How do you think about that right now? Well the biggest thing is around extensibility and openness, you know we were talking about openness before but the idea of API is where API is the new graphical UI because the developer is the builder and how do you really go sell to them and still deliver a great experience. Not just from the point of view of, oh I've given you the best APIs but the best SDKs. What does it mean to give them a development kit that gets them up and running in no time? And maybe even a graphical Kickstarter. So that, I mean we're working with our partners a lot where it's not just about delivering APIs, raw APIs because they're not as consumable but deliver SDKs and deliver graphical Starter kits to them so that they can be up and running building applications in two months rather than two years. I think that's at the core of what a platform is. And data and having a kind of operating system thinking seems to be another common pattern. I understand the subsystems of data, running and assembling things together. I think what is Nutanix? I mean if people ask me what is Nutanix I start with data. Data is the core of the company. We've done data for virtualization. We are now doing data for applications with Nutanix files. We have object store data. We are doing error which is database as a service. Without data we'd be dead in the company. That's how important it is. Now how do you meddle that with design and delivery? You know is basically where the 3Ds come together. I wrote a blog post Dave Vellante always last one I bring stuff because he always references it too. In 2007 I said data is the new development kit because back then development kits existed. SDKs, software development kits. You know MSDN was Microsoft's thing. You remember those glory days, D-Ride I know. But I was, the thesis was if data does actually come in it's actually an input into the software. This is what I think you guys are doing. That's clever, that's not well understood is. Data is an input, like a software library almost. A module, but it's dynamic, it's always changing and writing software for that is a nouveau kind of thing. This is new. And deliver it to the developer because right now data is in hardware, data is sitting in silos which are mainframe like systems. How do you deliver it where you can spin it up on their own? Like making sure that we democratize data is the biggest challenge of most companies. You know we're in a new era and I think you just pointed that out and we kind of talk about the cue all the time but we don't really talk about up front. It used to be UI was the thing, user interface, ease of use. I think now the new table stake feature in all companies is if you can't show value instantly in any solution that has a thing or things in it, then it's pretty much not going to happen. I mean this is the new expectation that becomes the experience for. And look at millennials and the new developers and they need to actually see instant gratification. Well cost too, I don't want to spend a million dollars to find out it didn't work. I want to maybe spend something variable. And look agility, the cliched word and I don't want to talk about agility per se but at the end of the day it's all about can we provide that experience where you don't have to really learn something over 18 months and provide it in the next three hours. Great conversation here with D. Raj Panaday, CEO of Nutanix about his vision. I always loved your software vision. You guys have smart engineers there. Let's talk about your company. I think a lot of people at your conference and your community and others want to know is how you're doing and how the company's doing because I think you guys are in the midst of a major transition. We talked about earlier hardware as software, software subscription, recurring revenue. I mean it's pretty much a disruptive enabler for you guys at one level as an opportunity. It's changing how you do accounting, it's having product management. The customers are going to consume it differently. It's been a big challenge and stocks taking a little bit of hit but you're kind of playing the long game. Talk about the growth strategy as you guys go forward. This has been a struggle. There's been some personnel changes in the company. What's going on? Give us the straight scoop. Yeah, in fact the biggest thing is about the transformation for this coming decade. And there's fundamental things you need to change for the world of cloud. Otherwise you're basically just talking the word rather than walking the walk itself. So this last quarter I was very pleased to announce that we finally showed the first strong point of this whole transformation. There's a really good data point coming out that the company is growing back again. We beat street estimates on pretty much every metric. Billings, revenue, gross margin. And we also guided about street estimates for billings, revenue, and gross margin. And I think that's probably one of the biggest things I'm proud of in the last six, nine months of the subscription transition. We're also telling the street about how to look at us from software and support, billing's point of view as opposed to looking at overall billings and revenue. And if you take a step back into the company, I talked about this in our earnings call, till three years ago we were a commercial company also doing federal and some international. And the last three years we proved to ourselves and to the community that we can do enterprise in our high-end customers, upmarket, and also do a very good job of international. Now the next three years is really about saying, can we do both enterprise and commercial together? You know, all together now, which is also coincidentally our dot-next message, is the proof that we actually have to go and show that we can do federal enterprise and commercial to really build a very large business. Well, the federal's got certification levels, we know that's different depending upon which agency you're talking to. Commercial, a little bit different ball game, SaaS becomes important, Cloud becomes important. The big trend is on-premise hardware, Outpost for AWS, Azure Stack for Microsoft. How do you fit into that? Because you, again, you said you're both ways. So are you worried about that? Is that a headwind, tailwind for you? What's the impact for this now fashionable on-premises shift, which I think is just a temporary thing for as Cloud continues to grow. I still argue with Michael Dell about this. I think Cloud is going to be a bigger tam, even though there's a huge total addressable market on enterprise, and that's like saying, there's a great tam for horses and buggies and cars are coming out. So, you know, it's different world between public Cloud and on-premises. What's the, how does that impact Nutanix on-premises? Well, remember I said about the word anywhere in our vision, make computing invisible anywhere. With software, you can actually reduce the tension between public and private. It's not this or that, it's this and that. So our software running on Outpost is a reality, you know, it's not like we're saying Outpost is one thing and Nutanix is another. And that's the value of software. It's so fungible, it's so portable that you don't have to take sides. Are you guys at ISV inside Amazon Marketplace? No, but again, it's still a thing. You know, Marketplace is still not where it should be, and it's hard to search and discover things, you know, from there. So we are saying, let's do it right. Remember, we were not the first hyperconvergence company, right? We were probably the ninth one, like the way Google was as a search engine actually, but we did it right because experience mattered. You know, that search box that did everything, that's what Nutanix's overall experience is today. We will do the public cloud right with our software so that we can use the customers' credits of Amazon, customers' credits of Amazon. But you're still selling direct, thank you partners. Well, everything is coming through partners, you know? So at the end of the day, we have to do an even better job of that, like what we're doing at HPE now. I think, you know, being able to go and find that common ground with partners is what commercial is all about, you know? Commercial is a lot about distribution. As a company, we've done a really good job of enterprise and federal. We're doing it with partners. What are the biggest impact areas for your business and business model and elements with software transition that you're scaling up on the subscription side? What are the biggest areas? Well, one is just communication because obviously a lot is changing, you know? As a private company, things change, nobody cares, the board just needs to know about it. But as a public company, we have investors in the public market and many of them are in the nose bleeding section, actually, of this arena. So really sitting in the arena, being that the man in the arena or the woman in the arena, how do you really take this message to the bleacher section is probably the biggest one, actually. Well, I think, you know, one of the things that I've always speculated on, you look at the growth of just pick some stocks that we all know, VMware, Microsoft, you look at the demarcation point where right when the stock was low to high was the shift to cloud and software. And with VMware, it was they had a failing strategy and they kill it and they do a deal with Amazon, games change, now they're all in the software to find data center. Microsoft, something that telecoms in, boom, they're in cloud, real commitment. And with Microsoft and specifically, that was a real management commitment. They were committed to software. They were committed to the cloud business model and took whatever medicine they needed to take. That's it, that's it. You know, you take short-term pain for a long-term gain and look, anything that becomes large over time, to me, it's all about long-term greed. And I use this word a lot and I want all employees and our customers and our investors to really think about the word. There's greed, but it's long-term greed. And that's how most companies have become large over time. So I think for us to have done this right, to say, look, we are set for the next 10 years was very important. It's interesting and everyone wants to be like Jeff Bezos. Everyone wants to be like you guys now because long-term greed or long-term thinking is the new fashion. It's the new standard in tech. The top 200 CEOs came out and talked about, are we taking good care of Main Street? Or are we just focused on this hamster wheel of three months reporting to Wall Street alone? And I think consensus is emerging that you got to take care of Main Street and you and I were talking about this. I look at investors as customers and I look at customers as investors which is really a kind of a contrarian way of thinking. It's interesting. We live in the world, we've seen many ways. I think the waiver on now from an entrepreneurial and venture creation standpoint whether you're public or private is the long game is the new 3D chess. It's where the masters are playing the best games. You look at the results of the best companies. And this is what the book about Uber from Mike Isaac from New York Times. The short-term thinking, win at all costs. That's not the 3D chess game that's going on with entrepreneurs these days. All the investment thesis is stay long-term and certainly now with this perceived bubble popping or this downturn that may or may not happen, long-term game is more important than ever. Your thoughts on that? No, I think the word authenticity has never been more important not just in the valley but around the world actually. What you're seeing with all this me to movement and a lot of skeletons in the cupboard out there. I think at the end of the day the word authentic cannot be artificially created. It has to come from within. What you talked about Satya. I look at Shantanu Narayan and Adobe CEO. They're authentic CEOs. I mean, I look at Dara now at Uber. He's talking about bringing authenticity to Uber. I think there's no shortcuts to success in this world. I think Adobe is a great example of what they've done. It's been amazing. I know you're on the board there. So congratulations. Final word, I'll let you get your plug in for the event. Talk to you and your customer base. Talk to your customers and investors out there that might watch this. From your state of mind, what's the state of the union for Nutanix? Speak directly to your customers and investors right now. Well, the tagline for dot next, Copenhagen is all together now. We're bringing clouds together. We're bringing app infrastructure and data together. I think it's a really large opportunity for us to go sell an experience to our customers rather than selling things. And all these buzzwords that come up in technology. As a company, we've done a really good job of integrating them. And the next decade is about integrating the public cloud and the private cloud. And I look at investors and customers alike. I talk about long-term greed with them. Providing an experience to them is at the core of our journey. Thanks for your insight, D. Raj. This is theCUBE conversation here in Palo Alto. I'm John Furrier. Thanks for watching.