 Live from Las Vegas, it's theCUBE, covering AWS re-invent 2018. Brought to you by Amazon Web Services, Intel, and their ecosystem partners. Okay, welcome back everyone live here, day two, CUBE coverage in Las Vegas for Amazon Web Services, AWS re-invent 2018. I'm John Furrier with Dave Vellante. Dave, six years we've been covering Amazon. With all the re-invented number one, super exciting, buzzing day today, all the big announcements, the big keynotes, and we're here with A.J. Patel, who's the Senior Vice President General Manager of the Cloud Service Provider Software Business Unit for VMware, CUBE alum, great to see you. Great to see you, John. Thanks for coming on. Real pleasure. You guys are in the news today. Absolutely. Two years ago, about a year and a half ago, roughly about that time. It might have been two years ago, it feels like two years. Like yesterday, VMware with him, Amazon relationship, super valuable. We were very bullish on it, if you remember. Absolutely. A lot of people were pooing it. We were, it's a positive, turned out to be a good call. Absolutely. Now, refresh the relationship two years. A lot of customer residents on this, Andy Gaston told me. Now, Amazon's in the premises business. Talk about what the relationship is with Amazon. I think we've always talked about hybrid being a two-way street. You're starting to see it happen now, right? The final frontier was Amazon making the call to bring it on-prem, so we're totally excited. It's actually pure validation too. I mean, super important. I want to also get your perspective on the culture. In my one-on-one with Andy Gaston, I spent two and a half hours with him at his home last Monday to preview this event, to get his insight, to really get deep into his mind around this. I really asked him, sincerely, what's the VMware relationship? He really is behind the relationship with you guys. Deep, meaningful partnership. You guys have a culture, synergies. Talk about why it's so successful and the synergies. At the foundation now, and I think it's all about the customer. You heard Pat say that too, right? We both have focused on what do customers want and who else understands customers better than VMware as an enterprise player, right? 20 years in the enterprise. AWS has built a phenomenal set of services for the developer. As they move into the enterprise, they need the operational intelligence, the enterprise readiness that VMware brings. So when you think about the private cloud and the public cloud coming together and making this kind of hybrid becomes a deployment model, an operating model. That's about location. We always thought about hybrid being, you know, the workload's moving from on-prem to cloud. Now it's just about running the workload where it makes sense. The services are just available. The automation is just there. It's secured to the core. And allowing us to engineer these capabilities really, the culture that we built. And customers get a lot of value out of that because it removes all this nonsense that they don't have to worry about anymore by vendor selection. Okay, I want to get one more comment because one of the things that's interesting is that the on-premises business that you guys did with VMware, AWS on VMware, RDS on VMware has changed the game. What specifically can you share about that relationship that is in market right now that's positive that you can point to and saying, this is the reason why this new operating model works. What specific thing can people look at to understand this? If you talk about data gravity all the time, it's just hard to move stuff when you have entrenched data over many years. What if you could bring the power of RDS, which is really a management value? AWS talks about undifferentiated heavy lifting. What else could you do in terms of taking all the database installed, patching, and make it available from the cloud, right? That's what RDS on VMware really brings. Leave the data as this, continue to operate your favorite database, but bring the cloud value of managing database at scale to the customer. And we're starting to really open the tide with today's announcement of, you know, AWS Outpost. It's really saying, hey, let's bring more services on a VMware stack and make it available to the customer. So John just recently did an interview with John Chambers, which was awesome. And John Chambers talked about there's no entitlement. So Chambers used to be an executive at Wang. He talked about, you know, 128 Boston and how there's no entitlement just because you're succeeding today doesn't mean you're not succeeding. So I'm impressed by both VMware and AWS and how you've both evolved your positions. So I mean, you guys used to try to do your own cloud. You sort of changed that. The deal with Amazon, a lot of people were skeptical. That's been a tailwind view. AWS never used to use the word hybrid. Now you're seeing that. So it's very interesting how you've evolved. And I think the legacy of great companies is going to be increasingly their ability to change, not hold on to dogma, move fast. I wonder if you could talk about that from a cultural and execution. Yeah, no, absolutely. I think us as IT or sitting in the kind of 650 area code, we always think about technology. But the long tail we talk about, I mean, people don't move and change things just because it's convenient. There has to be eventually business value. And if something's already working, you just don't go rewrite it. I was sitting through one of the AWS map events. Map is their migration, acceleration program. And they're a beautiful slide which says 70% of workloads are lift and shift, right? In spite of all these 440 cloud services, only 10% is net new workloads or net new applications. The core elephant, if you will, is this traditional enterprise workloads. And we talk about a common operating environment and common operations. What better way than taking a VMware running environment and mimic it in a public cloud? Or equally, take the automation that we did in public cloud, bringing it on prem. So this is disruptive in the sense it is bringing private cloud to the same level as public cloud, changing the game and kind of rebalancing it out. It's no longer about public or private. It's the same experience, whether it's in your data center or in the public cloud. Now explain further why that's not a one-way trip to the public cloud. People often criticize that as a bad move. And that was some of the initial sentiment. Why is it not a one-way trip? It's not a one-way trip because a lot of the benefits you look for, if you look at most of your workloads, they're pretty well-defined, they're pretty predictable. This notion of reserved instances on AWS exists for a reason. At some point, you think it's predictable workload, you want economics. If you can have all the cloud benefits on prem, on infrastructure that's already committed, or now in an OPEX model from AWS, what's the difference? I've got data centers, I've got space, I've got data already sitting there. Let me bring compute to where the data is versus shipping all my data to a public cloud using a massive snowmobile. It's just a practical reality. I want to run the work where it makes sense. And the other thing I want to point out and vivid on what Dave said in the culture is, the competitive strategy and the competitive landscape is different now with cloud than ever before. Intel, Rageen was on, Skill-In-General Manager at the data center. It's a bigger team now growing, and so it's not a win-or-take-all-win-lose scenario. There's a lot of co-creation. Your partnership with Amazon is a co-creation. So the new collaboration or co-opetition is kind of back in vogue. You share as an executive who leads the team, engineers, and business people, this business practice that works for the cloud. Share yours. So I think fundamentally VMware is all about customer choice and it's about ecosystem. The size of our company, if we try to battle these mammoth cloud providers, we just don't have the reach. When you turn on the ecosystem on its head, whether it's IBM that we talked about earlier as a strategic partner, or an Amazon, right? In the future of the other public clouds. For us, it's about being that ubiquitous digital platform. And the more we can turn on these partners to leverage us and make it easy for our customers to operate in a multi-cloud world, that's where the landscape is. But so my definition of the world is multi-cloud. We will have offerings at every level. We're going to compete, at the same time we're going to partner. And I think the customer is going to demand that and we're going to be responsive to that. Well, having said that, you have a special relationship with AWS. I don't think people understand the depth of the engineering and the integration. Maybe you could talk to that a little bit. I mean, the fact you have Pat talking about a future roadmap item with Outpost a year away, with us being neck to neck as an announcement as a strategic partner that tells you this is no longer a marketing relationship. We're engineering or co-inventing where the market's going to go, right? We're defining the future together and we're lockstep in terms of using the value of each of our platforms to further it for our customer. So I think this announced with a great indication of how the two companies have been looking ahead to say, where does the world going to look like? How do we collaborate together to deliver increasing value? And it's more about staying relevant for both of us as we, the marketplace. And that's good about Amazon. There is run hard, they run fast and that keeps the competitive advantage high. But let's talk about the future. What does it look like? Because, you know, Pat Gelsen said dial tone in his last keynote, referring to Kubernetes and so far to find as you move a stack, as customers move up the stack and you guys move up the stack, how do you guys become ubiquitous? What is the key value? Is it the core engine in NSX? Is it Kubernetes? How do you see your progression? So our strategy is based on two fundamental pillars. We call it the hybrid pillar where we're trying to run VMware everywhere we can which is the STDC story. Making STDC available on as many locations as possible. Whether it's AWS Outposts on-prem, AWS in the cloud, maybe a future hyperscaler, right? That's kind of the pillar one strategy. VMware ubiquitously providing a common digital dial tone. But also recognizing that it's public cloud native, right? Whether it's on-prem or in the cloud. Their acquisitions like cloud health are allowing us to focus on the operations problem. Because the number one problem is going to be around cloud operations and management. You know, how do I do resource management across clouds? How do I do security? What's my cost profile? How do I start to connect all of this? So increasing the value moves from compute to networking and NSXT becoming that kind of bridge across all crowds. So we think our strategic asset becomes from compute to networking and as a bridge connecting all these clouds. So IBM recently announced a $34 billion acquisition which underscores your strategy for multi-cloud. Any thoughts? No, wonderful. I think so. Arvind and I were chatting last week at his cloud summit and the reality is, you know, we support OpenShift with NSXT, right? I want to make sure networking as foundational for VMware across everything including Red Hat and OpenShift as we go forward. We're looking at in terms of Kubernetes and dial tone. We're all betting on K8. Kubernetes is going to be the new dial tone. How do we collaborate around that? As we work with AWS on the developer services, we're working with ICP, IBM Cloud Private and how that evolves with Red Hat and across multiple cloud. So here's another example of co-op addition, right? We're going to be the foundation and infrastructure but competing in the area of PKS and ICP. I love it. So it's going to be an interesting world. I love it. And I can tell you which way it's going to end up. Go ahead, tell us where it's going to end up. Yeah. The co-op addition and the co-creation really points to growing markets. Whenever you see that happening, it's a rising tide. No one's squabbling over declining market share. So good call there. I want to get your thoughts on this concept of net new workloads. But also I want you to weigh in kind of like, just we'll riff publicly here about the notion of what a stack is. In the old ways, a stack was a stack. You go bottom of the stack, go the higher of the stack. With cloud, you have a elastic model and since it serves, it's not like a traditional stack. And so people say, oh, Kubernetes is the new middleware. Kind of, not really. Yeah, so how do you look at this whole? You know my background, I'm ex-oracle middleware guy, right? Totally guys, why I cheated up for you. So if you think about the new operating system of the cloud OS, I think it's built around a couple of standards. So I think of Kubernetes as a new Java platform. But more interestingly, there's a technological service mesh you might have heard of. That is basically becoming the platform by which you can decide, I as an application need resources, here's my SLA, here's my cost profile. You infrastructure figure out where best to deploy it. So the battleground for me is going to be around who owns that control plane that defines where workloads lag. And the infrastructure is going to be very competitive, whether it's going to be EC2, VMware, SCDC, Google Cloud or Azure. But that value moves into that middleware layer that drives security management and resource management. Well that's what I was going to say. So I'm going to throw a wrinkle into the air. Data, real-time data addressability from multiple places, wherever it could come from, and also security boundaries. Half the factor in. So with power of Lambda and more compute, you can run a lot of VMs under the covers. So there's new kinds of elements that will solve a security problem or data. How do you look at that piece of it? So we look at data and the security in two problems. One is you had to have security built in, not bolted on. It's just too hard. Perimeter security is dead, zero trust is a new world. So as you work in that environment, we have to make sure that the platform, whichever the platform is, has built in security. Encryption end to end is going to be key. And being able to do key management at scale is going to be valuable, and identity and access management is going to be the new player. So if you look at a company like Octa, who would have thought of Octa doing so well? But single sign-on, and more and more access control become valuable. So as you move into the policy layer, more and more of these kind of shared services that control across cloud becoming valuable. And so I think that's where the interesting marketplace is going to go. So if every company is a SaaS company in the future, which in some operating model is cloud, the data center is a large edge, and you got a little edges. What is cloud service provider? Isn't everyone a cloud service provider at that point? I mean, so I think the cloud service provider definition changes from being that asset heavy data center hoster to being a managed services partner who's using their own assets and third party assets to add value to you. So if you look at the kind of value they're adding, how do I ensure continuous security and monitoring? How do I make sure your applications are always up? Those are the kinds of business problems you look to a partner to solve, or you have to solve it yourself. So everyone's moving up stack, if you will, in terms of the value added service. It's about outcomes. And it's not a remote set of distinct cloud services somewhere over there. It's this ubiquitous set of digital services that you have. But you're composing. You compose, exactly. The value moves into composition and management. All right, we figured it out. Yeah, I figured it out. I know we got to wrap Chuck, so Chuck's talking yelling in my ear. I got a earpiece on. Final question for you. We know you guys do good with customers. You own the operator market. Developer with Amazon. Operators are going to run a lot of stuff with dashboards. How has cloud success that you guys now have, have for two years and now continuing, impacted your ecosystem? Yeah, so our ecosystem basically has had to evolve. So our traditional reseller partners are starting to become MSPs. They have to move up and start adding value on top of services. They no longer are basically installing and fixing. We're moving from what I call the install, break, fix, operate to more of an advisory function. More of a consultative architectural function, right? More of a developer function. I love the AWS word of builders. You have to move to build versus operate because the basics of operate are going to commodize by these cloud services. They're saying the ecosystem wins by your tight partnership with AWS. The ecosystem evolves. It absolutely evolves. Everyone's having to rethink their business model and move forward. It's what we call the value flywheel and that's something that we're working on. We do a lot of reporting on. AJ, thanks for the insight. Thank you again. Great job. Great to see you. One of the top senior executives at VM we're laying is Sage Advice and predictions on theCUBE. Always good to have it. Breaking down off the hot news, there's so many announcements to get through. We're going to have Jerry Chen from Greylock on later to help us unpack all this. Stay with us for more after this short break.