 Live from Las Vegas, Nevada, it's the Cube at IBM Edge 2014. Brought to you by IBM. Now here are your hosts, John Furrier and Dave Vellante. That's okay, I'm here to work with you. Okay, welcome back everyone here live in Las Vegas for IBM Edge. This is the Cube, our flagship program. We go out to the events to extract the signal from the noise. I'm John Furrier, the founder of SiliconANGLE. I'm joined by Dave Vellante, co-founder of wikibon.org. Our next guest, Tom Cook, CEO of Permabid. Welcome to the Cube. Thank you John, great to be here. Thanks. So tell us what's happening at IBM Edge from your perspective. What is your take on the world here at IBM Edge? So, you know, top level is primary storage is on a tear with data efficiency. And, you know, perfect example of that is SVC incorporating RTC real-time compression. And the market is really, really looking for data efficiency now. And IBM is definitely out there with it. And they're starting to fill in their portfolio. And I think it's going to be a really exciting time in that. So infrastructure and hardware is actually the big part of it. We know the IBM story recently announced the service going to Lenovo, high-end systems, you can see power systems, a bunch of analytics. But hybrid cloud is where everyone wants to go. They want to converge infrastructure on-premise. But the hybrid cloud is the path. Do you see it that way? What does that mean for customers? I mean, they have data operations. They got global footprints. How do you see that picture evolve? Well, let's go down to the guys who've been really disruptive today. You know, the Nutanix of the world, the, you know, Pures and other people like that. You know, you could put them into the AFA class. You could put them into the Converge architecture class. Heck, you could even look at Amazon and Google and say, well, they're in the cloud space. But underneath it all, they don't think all those categories really matter as much as data efficiency does, because they're all playing the data efficiency game. The reason Nutanix and Pure are winning is because they're bringing data efficiency to the solution and it's kind of waking up the incumbents at this time. So we're seeing a real drive to adopting technology in this area. So can you define data efficiency, because, you know, Dave and I have been riffing on this concept that we're going, I guess no one else is going yet, but data first. We heard mobile first, cloud first. You're seeing around the corner, you're seeing data first. But what do you mean by data efficiency? Is that just protection? Is that backup, recovery, de-dupe, all the above? So let's talk about it related to primary. It's really thin provisioning, de-duplication and compression and doing those things so that you can operate in real time. So all these things have to occur in line and that means it takes care, that takes advantage of our edge, which is very high performance, very high IOPS, low footprint, very scalable and extreme savings in terms of time to market. But when you really think about data efficiency, it's all about cost efficiency. It's all about higher IOPS. It's all about doing more work with less dollars all the time. That's where the disruptive companies are starting to impact the marketplace and that's where all the majors are going with their product lines. So, Tom, I've got to ask you, I don't know if you've been sure you saw it, but the million dollar guarantee. Yeah. What do you make of the million dollar guarantee? I mean, it's fun marketing. It's a little different than what you see at IBM, very professional, doing business here and staying above the fray, but EMC will be heard about the million dollar guarantee. What do you make of that? Well, I thought it was a really interesting guarantee. I was here, I saw the address and I think it shows two things. First, it shows that EMC notices what Pure's doing out there and Pure's being successful with it at some level. But I think it also exposes kind of the Achilles' heel of Pure in that if you fill up their system, they slow down, they go from inline to a background operation, to an offline operation and that really slows down your operations within the array. Well, customers aren't going to withstand that today and so EMC's point on that is we can bring it to its knees and if you lose latency and you don't have predictable behavior, you don't have an array that's affected in the AFA market. So, help us understand this a little bit because you and I have talked a lot about data reduction techniques and the importance of bringing that to primary and the importance of doing that in a way that doesn't impact performance in a negative way. Clearly, IBM with real-time compression, the acquisition they made from store-wise does that, you know, great technology. You guys with Elberio do that. Are you saying that Pure is like a hybrid? So, Pure uses what we call a double-pass deduplication methodology where they stage data and then they bring it into storage. It means that there are two hits to the data and it means as that buffer fills up there's latency incurred and that's a challenge with their technology today and they're going to have to change it in order to progress in order to scale that and I'll tell you right now what we see in the field from other companies is they are onto that and I think that's what David Goulden's million-dollar bet was all about. He knows that it can be exploited and it's what they want to drive home in the marketplace. Well, it was funny. I joked that it's like, that's like three-part guaranteeing that the array is going to be yellow. But what it did was it shined a light on what they see as a competitive weakness and of course Pure will respond saying, look, we're kicking butt. We're selling a lot of these systems. We're driving performance. Every array has to do garbage collection, blah, blah, blah. So what do you make of that? Well, so I think the garbage collection problem is it is a real issue. It's an architectural issue. They'll be working with that too. The thing is they got $350 million in the bank and they're exploiting that and starting to take business out there in the marketplace. The fact is they've got deduplication and compression and other people don't and they're using that to their advantage today. Has nothing to do with all flash array. It has to do with the data efficiency and that's what's really striking the primary marketplace today. IBM, EMC, HDS, they all have a lot of flash and they're primary. So they can compete very effectively in terms of performance, but it's about price parity with performance and that's what Pure is exploiting. Tom, what do you make of the valuations today that you're seeing in flash? And they're bifurcated, right? I mean, you saw Violin go out with a purported billion-dollar valuation. Now it's, you know, way down, obviously, maybe a few hundred million. We've seen Fusion, you know, kind of bounce around. Now you hear Pure with a $3 billion valuation, but of course it's easy to have a valuation that doesn't fluctuate when you're private. What do you make of all that? You think it's warranted? So I think that the differential is all driven by data efficiency and their ability to exploit that in the marketplace. They have a cost differential today, an effective cost differential over people who don't have data efficiency in their product. And you compare that to Texas Memory Systems, which was acquired or Violin, or other people that are in the marketplace. Their valuations are somewhere between one-eighth or one-tenth of what Pure's are today. And I think that's all earned through data efficiency, not through the fact that they're an all-flash array. There's plenty of all-flash arrays out there. Yeah, right. So your premise is that they can deliver that efficiency. They're very feature-rich, but it's the efficiency ultimately that matters. So that's got to bode well for you, no? Yeah. I mean, just look at the situation. If all things being equal, if you had a Vmax array or an 8,000 array from IBM, that was as cost-efficient as the Pure data-efficient all-flash appliance, you'd buy the more fully-featured product from your current vendor. So that's what they're all banking on. So do you think these valuations, I mean, you remember when we saw the run-up on storage virtualization suppliers, whether it was Equalogic or Left-Hand and then subsequently 3-PAR, which set it off and compelling. And I guess you could throw an Isilon in there and I guess Data Domain, which was different. It really wasn't virtualization. What was part of that sort of last-storage bubble? It feels like this next one, this next-storage bubble is going to be bigger. It feels pretty frothy, doesn't it? It does. And do you think it's warranted? So, I mean, I think this is a very high valuation and they've got a whole lot of growing to do. In a market that's deflationary overall, that's a big mountain decline. But hey, there's some really smart money people involved. There's some really smart people involved in their company. They're executing really well right now. Let's see whether they can become, you know, a $500 million or a billion-dollar company to grow into that valuation. Because I feel like the virtualization bubble, I'll call it, actually was validated. I mean, they could think of a look at the acquisitions. Even, I mean, the biggest exit I think was 3-PAR at 2.4, 2.5. Again, throw data domain at a similar exit. I think those investments paid off for their respective buyers. I mean, where would HPB without 3-PAR? I mean, that's, you know, a multi-billion-dollar product now for them. EMC with Icelon, EMC with data domain. So, I think they were warranted. John and I are trying to figure out, okay, like you said, it's a deflationary market. So you wonder, okay, is it going to be as warranted as the last bubble? But it feels like because it's eating into such a big value layer of the storage business, that Tier 1 high-end, that it could be warranted. Well, certainly all the Tier 1s are very much taking notice of this and they're developing their strategies and they're going to be rolling out products. So I certainly think we're going to see that happen. But in addition to that, we're in a period of time where Google and Amazon and people like that are starting to really focus on the storage marketplace. Imagine if they take 25% of this market space and they contract the market that way. Suddenly, it's a lot harder to grow a business. We're going to see a lot of, basically, a tongue war out there to really battle out for this space. That's a great point, but I think that's the wild card. It's kind of like the open source, neutralizer, and Microsoft. So to take that one step further, if that really happens and if the third platform really happens and that transition occurs faster, maybe we won't see another array company acquired by a large company because it won't need to be. Or the technologies that are out there instead of tomorrow's problems. It'll be really interesting to see how this plays out. So John Chambers at Cisco Live is going on this week. He's saying that there's going to be a huge consolidation in the IT industry. Do you agree with that? I completely agree. I think we will see exit in the storage business. I don't think we'll see net entry with successful companies. On the array side, David, I was just talking, there's only a handful of people that certainly are on the flash side knocking it down at the top. And you're going to see EMC at the top on that market. Certainly the horses are jockeying for that last stretch. But there's a lot of people who don't even make the list of flash. Well, all the majors are shipping a lot of flash today. So I think we're going to see them continue. Just a few days ago, I was talking to somebody who said, oh, but you know the new arrays have 10 times the efficiency. No, they don't. They really don't. I mean, efficiency, yes, but not performance. And so the major array companies, the large companies, the tier ones are going to compete with that very effectively. Sorry, you said the premise was that the spinning disk arrays or the hybrid arrays have 10x? The premise this person was making was that the all-flash arrays can do things a whole lot better than what the high-end arrays can do in a conversion to flat. I disagree with that. We're going to see the high-end arrays move into certainly hybrid, which they are today, and more flash over time. They'll be very effective. Well, we've been talking about this here on the edge. And SVC is the best example of this. The 14-year-old stack, which many people might say, oh, well, it's old. Well, sometimes being old is a good thing because it's really fast. If your fiber channel is good. And I think the same thing is true for storage stack. It's non-trivial to build a storage stack that works, where you can recover, where you can do software upgrades that are non-disruptive, and on and on and on. And that's the advantage that SVC arrays have. At the same time, what I don't know is how much of the business that's being done there is for performance reasons versus software storage service reasons. And that's going to be interesting to see. Well, I bet historically 80% of the dollars that have gone into storage innovation have gone into performance tuning. So you build a feature, but then you have to get it fast. And that's one of the things that's been vexing the market for a period of time. And flash makes some things easier. D-duplication and compression are two of those things that makes easier. So we think this is really a boon to the industry. Now your model is you've developed a data reduction technology that's minimal performance impact in line and you're delivering it via a software model in SDK. That's right. We talk about that a little bit and how the uptake has been. Yeah, so when we went to do this we just looked at the marketplace and we said it doesn't need to be another array company. Some people have proved us wrong there. Hey, good for them. They're taking on a different battle than we are. What we really thought is we had an ability to make other people's storage better, much more cost efficient and do it in a way that they would have to invest five years and $50 million and make a lot of mistakes. So we've done that and we're bringing that to major players today. Our real test is whether our customers are successful. In 2013 our customers grew 50% year to year over 2012. This year we're shipping 1500 arrays per quarter. We're shipping in 1500 arrays per quarter and we're tracking to save enterprise $2.5 to $3 billion in net investment. We're really proud of that track record of our customers and our technology helping them do that. You're an arms dealer. You friends of everybody, right? We'd love to be friends with absolutely everybody. We're not with everybody. What's your big goal for the year? My final question for the segment is what's your goals for the year? Obviously the company is on a great path. You're kind of sailing in waters where there aren't a lot of icebergs but yeah you could get a watch out for some rough seas if you will. A lot of consolidation but you're going in as a arms dealer but it's a hot trend. The trend is your friend. There's a mega growth going on in front of you. What's your strategy? We'd like to ring more out of this marketplace and help our customers, our OEM customers to deal with the at better margins in an environment that's not going to be friendly. That's our goal. If we can save customers two and a half or three billion dollars this year, we'll be real proud of the year that we had as a company. What's the status of the company? Employee, head count, what's going on with the stuff? We're a private company 45 people growing like Stink right now. You're in Massachusetts? Yes we are. Anything in California offices? Yeah, we've got field sales operation in California in support too. Great. We're in Palo Alto. We're in Massachusetts, the Cube. Tom I appreciate you coming in. CEO Permanent Tom Cook start up making its ways into the green waters of the storage industry Dale. I think it's going to be very lucrative more. Navigating through the cartels. Thank you, Jeff. Thanks Jeff, for the big coming down. The Cube. We're right back live here in Las Vegas, Rybie, and Menj right after the short break.