 Lie from Palo Alto, in the heart of Silicon Valley. It's theCUBE, covering I-O. Brought to you by I-O. Now, here are your hosts, John Furrier and Peter Burris. Okay, welcome back everyone. We are live at Silicon Valley. This is theCUBE for special broadcast with I-O Conversations, an event here on Sand Hill Road in Silicon Valley at the Rosewood Hotel talking about data centers of service. I'm John Furrier with Peter Burris, head of research with SiliconANGLE Media, also general manager of Wikibon Research. And our next guest is Chavez-Tan, structure research analyst. Welcome to theCUBE. Thank you guys. All right, now you can break it all down. What's going on in this hosting, rack space when private, Amazon's killing it in the cloud, enterprise customers looking for cloud-like infrastructure. We've talked about power earlier, being a design factor, data at the center of the value partnership. What's the research show? What's the landscape look like? Yeah, no, great question. I think it really is summed up by data center assets that used to be operated by enterprises on premise are starting to be outsourced into data center providers that are, that's their core competency, which is operating, owning, and deploying data center capacity. So what we're seeing from the cloud and data center side is that because of the growth in what we call the massive scale cloud providers, so the Amazons and Microsoft Azures, the Google Compute, the Alibaba's of the world, that's really driving a lot of demand for data center capacity. And the reason, you know, on one end it's driving growth on the data center side. On the other hand, you're seeing it cannibalize a lot of the growth from the traditional hosting providers, so the shared hosters, the dedicated hosters, the managed hosting providers. A lot of companies now, especially the startup community in Silicon Valley, they're not jumping into, you're not going through the traditional kind of process or routes. You don't go from shared hosting to dedicated servers and then kind of migrate from there. They're just skipping straight to the cloud and then you're kind of reflecting that on the total growth of Amazon. And so what companies have been doing now is pivoting to the point of where they're saying, okay, we can't really compete on economies of scale with Amazon and Microsoft and Google. But what we can do is we can build almost like a management orchestration layer on top of Azure, on top of AWS and say to the customer, hey, you may not have the competency or the know-how to architect and operate an AWS deployment, but we know how to do that. Let us take care of that relationship for you. And in essence, they're reselling AWS, but they're adding their own flavor of what they call managed services. And for Rackspace, like you mentioned, they built their business on this concept of fanatical support. So really adding this fanatical support layer on top of that massive scale public cloud. This reseller is the second time I heard that. We also heard the first kind of inkling of it in the VM world when VMware kind of got out of the cloud and people were saying, hey, they should just resell other people's cloud and they got the VCloud Air Network. So obviously the trend is where do people fit in? So the industry vendors that provide the resources have that dynamic. And the other one I'd like to get your thoughts on is the global aspect you mentioned, Alibaba, right? So you're seeing the regional deployments of data centers on cloud providers. How does that all shake out into the landscape, the global impact? Yeah, I think you're seeing companies like Alibaba where they've traditionally focused on the Chinese market. They're growing so fast and they're getting a lot of international traction that they're starting to expand outside of China. So you're seeing a wave of Chinese companies, we call them BAT, Baidu Alibaba Tencent. They're really starting to really kick the tires on international expansion and they're expanding outside to Hong Kong, to Singapore, to Southeast Asia, to Australia and all the way to the US West Coast where we're seeing pretty large deployments from these guys. So that's kind of, I think you're seeing the genesis of a lot of these companies that have built their businesses on the cloud and that's really resonating with the new wave of businesses that are entering the market. A lot of it is built and architected to take advantage of the cloud. And the beauty of that is because you're not having to deal with legacy infrastructure anymore. It's this kind of gradual and conservative shift from a CAPEX heavy model where you own all these assets, you own all these buildings to a CAPEX light model where it's all about pay as you go. I want to only pay as much as I use and that's, I think the allure of the cloud and I think why you see companies like Uber, a get-around, a lift. I know that that's why they have been so successful in Airbnb. It's because they're really leveraging on that model of pulling resources together and optimizing it and also delivering it in a platform that makes sense and seamless for the end user. And the cloud native trend, you mentioned the Silicon Valley, starts skipping right to the cloud, I'll also call cloud natives. Interesting. And with that in mind, are you seeing anything on your radar and the research side that talks about the inter-cloud trend? Because we're seeing a lot of the big traditional vendors like VMware, UMC, HP and whatnot, trying to find a management orchestration layer as you pointed out. But there's a new dynamic around the inter-clouding and it's a lot to do with like latency, right? So like that's at workload related. So are you starting to see that conversation in your research or is it just simply still a horsepower economic model? What's your status on that? Yeah, I think latency is a big issue. Performance is definitely a key component of every driver when they choose to make a decision. Where do we deploy our infrastructure? Who do we deploy with? They're always looking at how does that latency affect, you know, from the point of their end users? How does that affect the end user experience? So I think latency is one factor and then another factor that you're seeing globally is data sovereignty. So having data housed in country or within a certain region, it's also a big factor in the incident. I mean locale, I mean having locale issue. That's a tough one. Balancing locale with performance around latency is then, you lose locale if you go for the latency. It's interesting. Are we gonna, how many net buyers of technology will that are big in 20 years? Ooh, that's a very, very broad question. And you know, I mean, I guess the simple answer is we don't know. It's such a, I mean the reason why I think that you're seeing a lot of new companies enter the business as well as consolidation happening at the same time is that it speaks to the diversity of workflows that you're seeing coming out from the enterprise, from the SMBs, SMBs. And then from that you're splitting it by verticals. So the financial services vertical requires a certain type of specification, certain type of service versus the oil and gas versus the e-commerce sector. So I think because there's so much diversity in terms of the workflows and applications and the requirements that each of these companies have that you're gonna see, still gonna see a large pool of IT buyers, IT strategic decision makers. I think in, you know, five, 10 years ago someone was saying that, you know, in 10 years you're gonna see two providers. You know, one big cloud provider and one big data center provider. And I don't think we've seen that resonate so far. I mean, we're continually seeing so much diversity. I don't agree with that. I think it's not gonna be a winner take all. I think it's gonna be a lot of different players. But I guess my question would be for you on your research is, generally speaking the internet has always been about connecting, right? So like the old days, you provision the circuit to a building and then you connect to the internet and you'd have some security to be VPN and whatnot, these things are normal. But the question is, is the current internet infrastructure, global infrastructure good enough to handle cloud at scale? If you have Google doing their thing, you have Amazon doing their, building their own clouds, if you will. Is the general other infrastructure even good enough around security, around latency, around just provide kind of the needs? Yeah, I would say the answer is both yes and no. And I think that's very market specific. So for Asia, for example, where we've done a lot of our research on, if you compare a market like Singapore to a market like Indonesia or India, I mean, it's night and day, the infrastructure quality, the connectivity, the robustness of infrastructure, the ease of doing business, the political climate. I mean, you name it, there's so many factors that tie into deploying and operating a business in various regions of the world. I mean, the US market, we're very privileged to be in a roughly homogenous regulation zone where you go from California to Vegas to the East Coast. I mean, it's generally governed by the same federal laws whereas in Asia, you're dealing with completely different governments, completely different languages, cultures. And so it's, I would say infrastructure quality to, like you said, deploy these sophisticated cloud workloads. I would say it varies on a market by market basis with obviously the US being, I think, one of the most mature, the most mature region in the world in terms of adoption, in terms of maturity. And that's interesting because markets like Asia where some people are saying they're maybe two to three years, maybe five years behind the US, they're looking at what's going on in the US and thinking, okay, how do we adapt to what's coming out of the US? And so in the US, the trend has been, we went from shared hosting, dedicated servers, VPS, you know, co-location and cloud. Whereas in Asia, they're just jumping straight from on-premise straight to the public cloud. I mean, they're skipping all these intermediate steps because they're seeing the growth coming out from the US, the level of innovation and they're thinking, we're going to adapt to this new wave of technology coming out from the US. And they have demand too, so that's a big driver too on that side with this overall connection. So is that the biggest way to explain that you're seeing the Asia Pacific and the rest of the world is just more cutting edge cloud? Or how would you describe the difference between APEC, Asia Pacific, and then the rest of the world relative to cloud and on-prem? Yeah, I think that's closely tied to mobile adoption and the level and the rate at which a lot of these emerging third world countries are starting to really adopt smartphones, internet. I mean, you go to what we call emerging markets such as Thailand, such as Laos, such as Bangkok. Those markets are still very young in terms of the level of infrastructure quality, the level of development. And so you don't see a lot of growth from these markets yet, but there's always the potential when the population gets more and more savvy on the tech side. But markets in Singapore, Tokyo, Sydney, Hong Kong, I mean, those are very, very mature markets with mobile adoption rates north of 100%. So I think you're seeing Asia as this kind of wild, wild west almost, that it's where a lot of these, a lot of companies like IO, for example, are making a bet on Asia. Goldman Sachs is making a bet on Asia because they're seeing the new wave of growth. Whereas mature markets, growth has relatively hit a point where it's predictable. I mean, it's very transparent. And frankly, I think companies are always searching for new avenues of growth in a much bigger and much larger, addressable market. Especially the Chinese market. But are Asian markets as conducive to sharing data as they are to sharing technology? That's a great question. And you mentioned China because China has been, you know, kind of the elephant in the room in Asia. You can't talk about Asia without talking about China. And I think everyone has, their views on China, everyone has expressed the challenges of doing business in China because of the way the government regulations are. It's a very close market. So a lot of our research, a lot of our time has spent focusing on, okay, China is big, China is growing. And it's tough to get in. People have said that. But what about the growth coming out of China? What about these companies that are, you know, growing too fast to really contain within mainland China itself? And you know, companies like, you know, for example, WeChat, you know, they're starting to kick their tires on global expansions. And it's really, how can Asia as a whole, as a region outside of China, better prepare themselves and better adapt to all this kind of growth coming out of that mainland market. So you don't think it's gonna be as, you don't think it's gonna be much of a constraint? You think that the adoption of how data is used and intellectual property is gonna be conducive to growth? Yeah, I think for open markets like Singapore, Hong Kong, Sydney, Tokyo, I mean, those are mature technology markets. And my experience in those markets have been, there's still a level of close perspective where it's a bit closed, not as open and transparent as the US where you're seeing a lot of US companies really partner and collaborate here. But in Asia, it's kind of, they still have their inhibitions, right? They still have a legacy mindset of, okay, this is my company, this is what we do, we're gonna protect our mindset. And also in Asia, you tend to see more of these providers that are kind of a one-stop shop for everything. They do hosting, they do design, they do kind of everything. Whereas in the US, it's more, you get more specialty firms, like an IO, we only do co-location and data centers and we do it really well. And in Asia, you have companies like Telcos that do everything, they do everything from SMB, telephone, VoIP to all the way up to co-location managed hosting cloud, so. What is the IO data center's story? What are those guys doing right now? Could you take a minute to describe their strategy, what their approach is, their differentiation and their value proposition? Yeah, absolutely, I can speak to kind of what I know from my time spent with IO. I've primarily spent a lot of time with IO in Singapore because we've done deep dives into the Singapore market. And I think with a lot of international expansion coming out from the US, that's generally customer-driven. And so the main driver for IO deploying in Singapore is driven by, it's one of its key customers, which is Goldman Sachs. I think it's publicly disclosed information. So I think that's the way that a lot of firms have attempted to enter Asia is by following a strategic customer over and then growing from that base from then on. I think IO is a really interesting data center company in the sense that it's able to marry both the software side and the physical asset and make it work seamlessly as one. And so you have the IO modules, which in itself it's kind of a revolutionary concept for the data center industry that's used to traditional real estate, raised floors, high ceilings, the traditional structure, whereas IO came into the market saying, hey, we don't need that type of design. We're bringing prefabricated models. I mean, quality control is there because it's all prefabricated in the factory and shipped to the customer. So you don't have to worry about a ton of moving pieces. So from that standpoint, I think that's where you see a lot of the efficiency that IO brings to the market. And on top of that, I mentioned the software layer, which is the IO kind of OS, right? The DCIM data center infrastructure management tool that it's layered on top of their physical asset. And I think that really gives the customer a sense of, okay, what's happening within that module of mine? What's the power consumption? Like how much power am I actually drawing? Am I fully utilizing my asset? And so that type of transparency really resonates, I think, with the customer base. I think it's been a big driver of why IO has been, I think, so successful both locally and internationally. Shubhish, thanks so much for spending the time here to come on theCUBE. I'll give you the final word. Share your thoughts on the biggest changes that are gonna be happening over the next year or so in your mind on a global scale relative to hosting, data center on premise, and the prospects of cloud. Yeah, I would say the biggest takeaway I would say is, can the public clouds continue to grow at the rate and the pace they're growing? And I think AWS is growing at a $10 billion annual run rate pace. Can that pace continue? Because a lot of the growth in data center space has been coming from these top four providers, Oracle, AWS, Azure, Google Compute. And so what would happen if the public cloud slows down or there's some security issue that inhibits growth? I think there'll be something to watch going forward. And also looking at also one thing to keep in mind is the ecosystem that's developing around the public clouds and how that's evolving the way IT is being consumed and delivered. IT is a service. Thanks so much for spending the insight. It's theCUBE live at the Rosewood Hotel in Silicon Valley on Sand Hill Road. This is theCUBE's special presentation with IO Conversations. Data center as a service event here at the Rosewood. We'll be back with more after the short break. Founder of Silicon.