 Live from Las Vegas. It's theCUBE. Covering VMworld 2017. Brought to you by VMware and its ecosystem partner. Hey, welcome back everyone. We're live here in Las Vegas. Behind me is the VM Village. This is theCUBE on the ground. Live at VMworld, I'm John Furrier with Dave Vellante. You decide to have Sanjay Poonan's theCUBE VIP. New badge is going out five or more times. You get a special badge on the website. Chief Operating Officer, Chief Customer Operations as well. At VMware Sanjay. I think I won one of your hoop madness. What do you call those? Cube madness. Yeah, that's right. You've won one of those. You won one came in second to the bot. Next year you won. We're going to check the algorithm on that. That's before we had machine learning, so. Sanjay, great to see you. Always pleasure, John and Dave. Thank you for having me on your show. So, in fairness to the VMware management team, I got to say, great content program. Thank you. Usually you can see kind of maybe some things that are kind of a little futuristic on the spot. Big time on the content. True private cloud, data that Wikibon reported on. You guys are right aligned with that. Hybrid cloud is where it's going for multi-cloud. You talk multi-cloud. The Kubernetes orchestration vision for cloud native. And even you are doing some interviewing on stage. Time to be honest with Google. So, tell us what's your perspective? Because you got a balance here. You got the reality of the Amazon relationship. Front and center, delivered, big time there. Shipping, Western region, VMware on-prem and on-cloud. And this new cloud native vector of orchestration and simplicity. Yeah, I think, listen, from our perspective, as I described in sort of that one chart, what I try to put it in Sesame Street, simple terms that I like to describe. VMware is one of the most fundamental companies that had a incredible impact on the data center. Taking more and more cost and complexity. We are the de facto backbone of almost everybody's data center. But as the data center moves to the cloud, you have to ask yourself, what's the relevance? And we've now shown, same way with the desktop going to mobile, and that's the end user stuff we've talked about in the last few shows. But let's focus on that cloud part. We really felt as people extended to the public cloud, we had to change our strategy to not seek to be a public cloud ourselves. That's the reason we divested vCloud Air and focused on significant things we could do with the leading public cloud vendors. As you know, Andy Jassy is a classmate of mine. Pat Raghu, myself, began the discussions with Andy two years ago, and we announced the deal last year in October, this year having him on stage was for me personally, a dream come true and really nice to see that announcement. But we wanted to make sure we were also relevant to some of the other clouds. So earlier this year in February, we announced Horizon Cloud, the VDI product in Azure. Today we announced Kubernetes, VMware, Pivotal, and Google forming Kubernetes. IBM Cloud, so all of the top four clouds, AWS, Azure, Google, and IBM have something going with VMware or VMware Pivotal. That's a big statement to our multi-cloud vision. And what a changeover from just two years ago when the ecosystem was kind of like a deer in the headlights, not knowing which way to zig or zag, do they cross the street, where we going with this. Now the clarity is very clear. Cloud and IoT and Edge with Amazon right there, a lot of workloads there with multi-cloud. So the question I got to have you is that as we just talked to the Google guys, is VMware turning into an arms dealer? Because that's a nice position to be at because you're now driving VMware into multiple clouds. I think when I was on your show last time, I described this continent called VMware and then bridges into, let me try another and see if this works, that was good. But it had its 12 months shelf life. Think about the top four public clouds as sort of Mount Rushmore type figures. Each at different heights, AWS, Azure, Google, IBM, Cloud, in market share, they're the top four. If you want to build a house on top of Mount Rushmore, okay, it could work, but you're going to have to build it on top of one president's head. The moment you want to build it, you need some concrete infrastructure that fills in all the holes between them. That's VMware. It's the infrastructure platform that can sit on top of those very disparate levels of Mount Rushmore and make yourself relevant from on. So that's why we feel whether you want to call that a quintessential platform and arms provider, whatever it is, for the 4,400 cloud providers plus the top four or five public cloud players today, VMware has to be relevant. We weren't two or three years ago. Now, for the top three, we're very relevant. I call it a binding agent. You're the binding agent across clouds. That's where you're really trying to become. But I wonder if you're talking about the clarity. I mean, VMware, things are good right now. Two years ago, it was looking kind of, hmm, maybe not so good with license growth down and now it's up. Stock prices, almost highest, yeah. Stock prices, okay, so I want to understand the factors behind that. You mentioned the clarity around VCloud Air and the AWS agreement, clearly. The second I want to attest is the customer reality of cloud, that I can't just ship my business to the cloud, ship my data to the cloud. I got to bring the cloud model to the data and then did that in your conversation with customers, those two factors lead to customers being more comfortable signing longer term agreements with you guys. Is that a big part of the tailwind? I wonder if you could discuss that. Yeah, Dave, I think that's absolutely right. One of the things I've learned in my 25 years of IT is you want to keep being strategic to your customers. You never want to be in a place where you're in a cul-de-sac. And I started a sense, right, not definitively, but perhaps two years ago, there was a little bit of that cul-de-sac perception as our license revenue was growing, particularly on this cloud strategy. Are you trying to be a public cloud? Are you not? What's your stance versus VMware? AWS as one example. And with vCloud there, there was a little bit of hesitation. And if you asked our sales teams the clarifying of our cloud strategy, which last year was okay, but didn't have the substance in the punch. Now you've got an AWS coming on stage and the other cloud providers where we have substantive review. I think the clarifying the cloud strategy gave the ability for customers to say, even while they were waiting for AWS to be shipped, the last year, three, four quarters, our spending of on-premise VMware stuff has gone up because they see us as strategic. The second aspect I think is our products are now a lot more mature than they were before outside of vSphere. VMware cloud foundation, which consists of storage, networking, vSat, NSX, and you've talked to those people on your stage. Workspace one and user computing. These have really, really helped. And I think the third factor is we really focus in building a very strong team. From Pat, myself, to Raghu, Rajiv, Ray, Maurizio, Robin. I think it's a world-class infrastructure. So we just added Claire Dixon as our chief comms office for eBay. I got met her last night. This is for us now and everyone in the rest of the organization, we want to continue building a world-class sort of warrior-style strength of numbers. Quick follow-up, if I may. Just a little Jim Kramer moment. And the financials looking good. You just raised four billion of cheap debt. The operating cash flow, $3 billion. And the nice thing about the clarity around vCloud Air is the capital expenditures, is a very capital-efficient model that you guys have now. And I've been saying, you can't say it, but to me, the stock's undervalued. When you do the ratios and the multiples on those factors, it looks like a cheap stock to me. I would love to see you keep going. We can't buy it because we have to disclose it. The big position in VMware. No, no, no. We don't have any stock. We just want to keep growing and the market will fairly value us over time. Well, you guys had a good team at VMware. Let's go back and unpack that. But there was a transformation. Peter Burris was talking about IBM over the years, had a massive transformation. So really kind of a critical moment for VMware, as you're pointing out, you had this great discipline, great technology, great community, folks still there now, as you mentioned, but that transition from saying, we got to post a position, are we in cloud or not? Let's make a decision and move on. And as Dave said, good economics behind not having a cloud. But I saw our slide that said VMware cloud. You can still have a cloud strategy using Amazon. Okay, I get that. So the question for you is this, this debate that we've been having. Just like in the cryptocurrency market, you're seeing native tokens in cryptography and then secondary tokens, just one went crazy today. With cloud, we see native cloud and then new clouds that are going to be specialty clouds. So you're seeing a huge increase into the long tail power law of cloud providers that are sitting on other clouds. We think this is a trend. How does VMware help those potential Accenture clouds, the Deloitte clouds, the farming drone cloud that's going to have unique applications? So if applications become clouds, how does VMware help them? It's a really good question. So first off, we have 4,400 cloud providers that built their stacks on VMware. And it could be some of the servers for it. Probably the best example are companies like Rackspace, OVH, T systems, and we're going to continue to empower them. And I think many of them that are in country specific areas, France, Germany, China, Asia, have laws that require data to be there. And I think they quite frankly have a long existence and some of them like Rackspace adapted their model to be partnering with AWS. So we're going to continue to help them. And that's our VMware cloud provider program. That's going to be great. The other phenomenon we see happening is these mini data centers start in a form at what's called the edge. So edge computing is really almost like this mobile device becoming bigger and bigger. It becomes like a refrigerator. It becomes like a mini data center. And it's not sitting in the cloud. It's actually sitting in a branch someplace or somewhere external. VMware stack could actually become the software that powers that whole thing. So if you believe that basically cloud providers are going to be three or four or five big public clouds, a bunch of cloud providers that are country specific or vertical specific, again, in these edge computing, VMware becomes quintessentially important to all of those, right? And we become what you call it, a platform, a glue or whatever have you. And our goal is to make sure we're pervasive in all of those. I think it's going to, the world is going to go from mobile cloud to cloud edge. And the whole world of cloud and edge computing is the future. So you believe that the potential could be another second coming of more CSPs exploding big time. Especially with edge computing and country specific rules. There's some countries that just won't do business with a U.S. public cloud because of whatever reason. Well, many of those 4,400 would say, hey, we have to have a niche so we can compete with AWS so we don't get AWS-ized, right? So what's your message to those guys now that you're sort of partnered up with AWS? Listen, OVH is a good example. Virtual streams on the ground. I'll give you two good examples. OVH, we sold vCloud Air to them. We are helping those customers be successful. I go to some of those calls jointly with them. They are based in France, expanding some of their presence to the U.S. and have got some very specific IP that makes their data centers efficient. We want to help them be successful. Some of the technology that we've built in vCloud Air we're now licensing to them so we can make it be successful. Virtual stream, one of the, I remember you know Rodney Rogers has been here on the show. Mission critical apps is tough for some of the public clouds to get right. They perfected the art and I've known them from my SAP days. So there's going to be some of these other clouds that are going to be enormously successful in their niche and their niche are going to get bigger and bigger. We want to make sure every one of them are successful. And I think there's a big opportunity for multiple vendors to be successful. It won't be just the top three or four public clouds. There will be some boutique usage by country or some horizontal vertical use case. Good for an arms dealer. Well, I mean, this is my whole point. This is what we've been getting at. We're kind of riffing in real time. Little competitive strategy. We got the Harvard MBA and I'm the Babson guy. We'll arm wrestle it out here. Maybe do some car karaoke together. But this brings up the question. I know I've been saying for a long time on theCUBE and Dave and I have been talking about. We see a long tail torso neck expanding. Where right now it's a knife edge long tail, top native clouds and then nobody else. So I think we're going to see this expand out where specialty clouds are going to come out for your reasons. So that is going to open up the door. And those guys aren't going to want their own cloud. I agree. That's a channel and app. Who knows? Look at example. One, two other examples specialty clouds. These are SaaS vendors. If you look at two vertical companies, Viva and Guidewire. These are SaaS companies that are in the life sciences and insurance space. They've been enormously successful in a space that you'd have probably expected maybe SAP or Salesforce would have done, but they've been focused in a vertical market, insurance and life sciences. And I think there's going to be many providers the same way at the IS level or the PAS level to also be successful. And we welcome. This is going to be a large multi-cloud world. Edge cloud. You guys talked about the edge before. Pat had the slide of the pendulum swinging. Exactly. What does that edge cloud do to the existing business? Is it disruptive or is it evolutionary in your opinion? It's disruptive in the sense that if you've taken a hardware centric view of that, I think you're going to be disruptive, right? Take things like software-defined WAN, software-defined networking. So I think the beauty of software is that we're not depending on the size of the hardware that sits underneath it. Well, it's a big data center, a small edge of the cloud. We're building this to be in all form factors and I agree with Mark Andreessen in the sense that software is eating up the world. So given the fact that- In the edge. Yeah, so our premise is if there's more computing that's moving to the edge, more software-defined happening in the edge, we should benefit from that. The hardware vendors will have to adapt and that's good. But software becomes quintessential. Now I think the edge is showing a little bit of like, Peter Levine had a story about how cloud computing might be extinct if edge computing takes off. Because what's happening is this machine starts to get bigger and bigger and sits in a branch or in some local place and it's away from the cloud. So I think it actually is a beautiful world where if you're willing to adapt quickly, which software lets you do, adapt quickly, I think there's a bright future as world moves cloud, mobile, and edge. Great stuff, Sanjay, and I was referencing car karaoke. You have on your Twitter- Oh, the car pool karaoke. Car pool karaoke. It was a fun little thing. But we could do it together, three of us sometime. I don't do karaoke. Final- Just sing, man. Just be out there doing your thing. I embarrass myself on the cube enough. I don't need karaoke to help there. I'm in. All right, I'll do it. All right, final question for you. We're talking about- That's a deal. I'm proud of it. Let's do it. Final question. Upside down right now, the computer industry has been thrown up in the air. It's going to be upside down reconfiguration. You've been in the business for a long time. You've seen many waves. As the waves now are pretty clear. What's the fallout going to be from this? For customers, for the vendors, for how people buy and build relationships in this new world? I think there's a couple of fundamental principles. I talked about one software. Let's not repeat that. I think ecosystems rule. It's really important that you don't look at yourself as having, you know, to own the full stack. VMware's chosen to be hardware dependent. Yes, we're owned by Dell, but you've seen us announce an HP partnership here, right? You've seen us do deals with Fujitsu. We had AWS cloud and Google cloud. So when you view the world, I love this line by Isaac Newton. He said, I see clearly because I stand on the shoulders of giants. And to me, that's a very informed strategy to actually guide our ecosystem strategy. Who are the giants in our space? It's the companies that are relevant with the biggest market caps. Apple, Google, Microsoft, you know, AWS is part of Amazon. And then, you know, HP, EMC, Dell, so on and so forth. You listen to them. My SAP, if we're relevant to all of them, I'd love to see the momentum of VMworld and the momentum of reinvent start coalescing, right? Collectively, there's probably 100,000 people who come to all of our VM or V forums. Andy Jassy told me he expects 40,000 to reinvent. And maybe across all of his AWS summits, he has 100,000. I'm sharing with them an idea. Why don't we have these two amoebas of growing conferences start to coalesce where we mingle, maybe 20% goes to both conferences, but we'll come to your show and be the best software vendor, okay? That hijacks your show, so to speak. I didn't use that word. But we become the best vendor and we'll roll out the red carpet to you. Now, we've got a collection of 200,000. We couldn't have done that on our own. That's an example of AWS and VMware partnering. Now, it doesn't have exclusive AWS, we could do it with another partner too. Microsoft doesn't show up at the AWS reinvent conference. We do, right? Similarly, we could maybe do something very specific to Azure and VDI at the Microsoft event or Kubernetes and Google. So for VMware, our strategy needs to be highly relevant to the power players in the ecosystem and then guiding our software-defined strategy to make that work. And I think if we do that, you could see this be a 10 billion and bigger company. It says it's not a zero sum game. That's what you're betting on. Everybody wins. And if you can stay in the game, everybody wins. And I think in the software-defined infrastructure space, we like our odds. We feel we could be the leading player in that software-defined area. And this changes and re-images the relationship between how people consume or procure technology because the cloud's a mosaic, as Sam Ramje was telling me earlier. Oh, you had sound on your show. Wonderful. I had him on earlier and he sees the cloud as a mosaic. He's a fantastic thought leader in open source. We were deeply grateful to have him at our event today. And Andy Jassy, your classmate and friend, collaborator, he was on stage, great performance that he gave. Really talking to your crowd saying, we got your back, basically. Not a Barney deal, not an optical deal. We're in on it. We're investing and we got your back. That's interesting. We want to be with all of the key leaders that are driving significant parts of this ecosystem. We want to be friends. Our tent is large for everybody. Provided there's, like you said, not a Barney announcement, so that's provided there's value to the customer. There is, our tent is large, right? We will have point competitors here at Dan's base. And you know me, I'm very competitive. I've not named competitors too much here on this show. But if anything now, my mind's a lot more focused on the ecosystem. And I want to make this tent large for as many, many players to come here and have a big presence at VMworld. And the ecosystem is reforming around this new cloud reality. And the edge is going to change that shape even further. Competing on value, competing in a new ecosystem requires a new way to think about relationships. It's really the- If I could give you one example then. In the world of mobile, who would have thought that the most important company to mobile security and the enterprise to Apple is VMware now, thanks to AirWatch or to Samsung, whatever it might be, right? This is the world we live in and we have to constantly adapt ourselves. And maybe next year we'll be talking about IoT or something different. And their ecosystem. Sanjay Poonan, COO of VMware. Good friend inside theCUBE, always candid. Thanks for sharing your commentary and color on the industry, VMware and your personal perspective. I'm John Furrier with Dave O'Loughby at CUBE Coverage Live in Las Vegas here on the ground floor in the VM Village. We'll be right back with more live coverage after this short break.