 From Las Vegas, it's theCUBE. Covering VMworld 2018. Brought to you by VMware and its ecosystem partners. And we're back here at the Mandalay Bay in somewhat beautiful Las Vegas where we're doing third day of VMworld on theCUBE and I'm Peter Burris and I'm joined by my two lead analysts here at Wikibon with me, Jim Kabilis, who's looking at a lot of the software stuff, David Foyer, who's helping to drive a lot of our hardware research. Guys, you've spent an enormous amount of time talking to an enormous number of customers, a lot of partners, and we all participated in the analyst day on Monday. Let me give you my first impressions and I want to ask you guys some questions here at YouThought. So, I have, this is, you know, my third, I guess, VMworld in a row and my impression is that this has been the most coherent of the VMworlds I've seen. You can tell when a company's going through a transition because they're reaching to try to bring a story together and that sets the tone. But this one, Pat Gelsinger did a phenomenal job of setting up the story. It makes sense, it's coherent, possibly because it aligns so well with what we think is going to happen in the industry. So, I want to ask you guys, based on three days of wandering around and talking to customers, David Foyer, what's been the high point? What have you found is the most interesting thing? Well, I think the most interesting thing is the excitement that there is over VMworld. If you contrast that with two, three years ago, the degree of commitment of customers to VMworld, the degree of integration they're wanting to make, the degree rate of change and ideas that have come out of VMworld, it's like two different companies, totally different companies. Some of the highlights for me were the RDS, the bringing from AWS to onsite, as well as on the AWS cloud, RDS capabilities. I think that's a very, very interesting thing. That's the relational databases, services, the MariaDB and all the other services. That's a very exciting thing to me and a hint to me that AWS is going to have to get serious about everything. Well, more is coming. And I think it's a really interesting point that after a lot of conversations with a lot of folks saying, oh, AWS, it's all going to go up to the cloud and wondering whether that also was a one-way street for VMwear customers, that now we're seeing it's much more of a bilateral relationship. It's a moving it to the right place. And that's the second thing, the embracing of multi-cloud by everybody. One cloud is not going to do everything. They're going to be SaaS clouds. They're going to be multiple places where people are going to put certain workloads because that's the best strategic fit for it. And the acceptance in the marketplace that that is where it's going to go. I think that again is a major change. So hybrid cloud and multi-cloud environments. And then the third thing is, I think the richness of the ecosystem is amazing. The going on the floor and the number of people that have come to talk to us with new ideas, really fascinating ideas is something I haven't seen at all for the last three, four years. And so I'm going to come back to you on that, but it goes back to the first point that you make that there is a palpable excitement here about VMware that two, three years ago, the conversation was how much longer is the franchise going to be around? Jim, but now it's clear. It's going to be around. Jim, how about you? Yeah, actually, I'm like you guys, I'm a newbie to VMworld. This is my very first. Remember, I'm a big data analyst. I'm a data science and AI guy. But obviously I've been aware of VMware and I've had many contacts with them over the years. My takeaway, and I like Pat Gelsinger's, I agree with you, Peter, a really coherent take. And I like that phrase, even though it sounds clunky and Pat kind of apologized, they are the dial tone to the multi-cloud. It certainly really gives you a strong sense of who else can you characterize in this whole market space, cloud computing as essentially a multi-cloud provider who provides the unifying virtualization glue to help customers who are investing in AWS and maybe in a bit of, you know, adopting Google and Microsoft Azure and so forth. Providing a virtualization layer that's above server virtualization, network virtualization, VDI, all the way to the edge, nobody can put it all, is putting it all together in quite the way that VMware is. One of the chief takeaways is similar to David's, which is in terms of the notion of a hybrid cloud, VMware with its whole, with its doing with RDS, but also projects like this project dimension, which is in project, in progress, taking essentially the entire VMware virtualization stack and putting it onto an appliance for deployment on the edges and then for them to manage it, VMware, that's their plans, as an end-to-end managed edge cloud service and so forth. Wow, the blurring of public and private cloud, I don't even think the term hybrid cloud applies, it's just a blurring, the cloud is the multi-cloud. The cloud is moving to the workload, the cloud is the multi-cloud. The cloud's moving to the workload, the cloud's moving to the data, which is exactly what we've been saying for years. What's powerful is that they are halfway there in terms of that vision, halfway in the sense that RDS has been announced in VMware and this project dimension, they're well along with that in terms of the briefings for the analyst space. I'm really impressed for how they're architecting this. I think they've got a shot to really dominate. Well, I'll tell you, so I would agree with you just to maybe provide a slightly different version of one of the things you said. I definitely agree. I think what VMware hopes to do, and I think they're not alone, is to have AWS look like an appliance to their console, to have Azure look like an appliance to their console. So through VMware, you can get access to whatever services you need, including your VMware machines, your VMs inside those clouds, but that increasingly their goal is to be that control point, that management point, for all of these different resources that are building and it is very compelling. I think that there's one area that I still think we need more from. As analysts, we always got to look through on what is more required. And I hear what you say about project dimension, but I think that the edge story still requires a fair amount of work. It's a project in place, but that's going to be an increasingly important locus of how architectures get laid out, how people think about applications in the future, how design happens, how methodologies for building software work. David, what do you think? When you look at what is more is needed for you? So I think there are two things that give me a small concern. The edge, that's a long-term view, so they got time to get that right, but the edge view is very much an IT view top down, and they are looking to put in place everything that they think the OT people should fit in with. I think that is personally not going to be a winning strategy. You have to take it from the bottom up. The world is going to go towards devices very rich devices and sensors, lots of software right on that device, the inference work on those devices, and the job of IT will be to integrate those devices. There won't be those devices taking on the standards of IT. It'll be IT that has to shape itself to look after all those devices there. So that's the main viewpoint, I think, that needs adjustment, and it will come, I'm sure, over time. But as you said, there's a lot of computer science that's going to be an enormous amount of new partnerships that are going to be fabricated. Exactly, yeah. But to make this happen, Jim, what do you think? Yeah, I agree. In terms of partnerships, one big gap from both VMware and Dell Technologies, partnerships and Romyfs and Technology Proposals AI. Now, they have a project VMware called Project Magna, which is really AI ops. In fact, I published a Wiki about a report this week on AI ops, AI to drive IT service management and they're doing some stuff, they're working on that project, it's just in the beginning stages. I think what's going to happen is that VMware, Dell Technologies, they're going to have to make strategic acquisitions of AI solution providers to build up that capability because that's going to be fundamental to their ability to manage this complex, multi-cloud fabric from end to end continuously. They need that competency internally. That can't be simply a partner providing that. That's got to be their core competency. You know, I'm going to push and I'll give you the contrarian point of view. Okay. Because we actually had concepts, this is beyond VMware. We've had a lot of conversations about this. Does that, is that a reflection of David's point about top down, buying things and pushing it down as opposed to other conversations we've had about how the edge is going to evolve where a lot of OT guys are going to combine with business expertise and technology expertise to create specialized solutions and then VMware's going to have to reach out to them and make VMware relevant to them. Do you think it's going to be VMware buying a bunch of stuff? Or, and then creating those solutions? Or is it going to be the solutions coming from elsewhere and VMware has to be becoming more relevant to them? Now, you can still be buying a bunch of stuff to get that horizontal in place, but which way do you think it's going to go? I think it's going to be the top down. They're going to buy stuff because I talked to one of the channel people this morning about, you know, what they've got an IoT connected bundle and so forth they announced at this show. You know, I think they agree with me that the core AI technology needs to be built into the fundamentals like the IoT stack bundle that they then provide to the channel partners for, you know, with channel specific content that they can then tweak and customize to their specific needs. But, you know, the core requirements for AI are horizontal, you know, it's the ability to run neural networks, to do predictive analysis, anomaly detection and so forth. This is all cross cutting across all domains. It has to be in the core application stack. They can't be simply something they source for particular channel opportunities. It has to be leveraged across, you know, the same core TensorFlow models for anomaly detection, for manufacturing, for logistics, for, you know, customer relationship management, whatever. So, are you saying essentially that then VMware becomes that horizontal play, even though, even if the solution providers are increasingly close to the actual action where the edge is? I'm going to disagree with you gently on that, but we can still be friends. No, no, let's be in the mouth if you want. I've been working out here today. I can fit you off. Don't worry about that, dude. No, it's just, you know, I'm an OT guy at heart, I suppose, and I think that that is going to be a stronger force in terms of VMware, but there will be some places where it will be top down, but other places where it's going to be needed to adjust. But I think there's one other, the very interesting area I'd like to bring up in terms of this question of acquisition. What we heard about beforehand was excellent results and VMware has been adding a billion dollars a year in terms of free cash there, and they have 13 billion in short-term cash there, and the refinancing from Dell is going to take 11 of that 13 and put it towards the company. Now you can- Towards Dell Tech, yes. Well, Dell as a whole and Silver Lake, towards those partners. I personally believe that there is such a lot of opportunity that's going to be out there. If you take NSX, for example, it has the potential to do things in new areas, they're going to need to provide solutions in those new areas and aggressively go after those new areas, and that's going to mean big investments. And many other areas where I think they are going to need acquisitions to strengthen the whole story they have, the whole multi-cloud story. You've been talking about this real-time operating system. I mean, NSX has a network running virtualization backplane. I mean, it needs to go real-time, sub-second guaranteed, they need the end-to-end- And big investments in that, yeah. They need to go there. Yeah, so we're agreeing on that. And I get concerned that it's not going to be given the right resources to be able to actually go after the opportunities that they have genuinely created. It's going to be interesting to see how that plays out. So I think also- Iceberg's in the future. Exactly. I think what we're ultimately saying, though, is that there is going to be a set of solution players that VMware is going to have to make significant moves to make them relevant. And then the question is, what's the value story? What's the value proposition? It's probably going to be like all partnerships. Some are going to claim that they are doing it all. Some are going to VMware is going to claim that they do more of it. But at the end of the day, VMware has to make themselves relevant to the edge, however that happens. I want to pick up on NSX. Because I'm a pretty big believer that NSX may be the very special crown jewel in a lot of this stuff. This notion of hybrid cloud, whatever we call it, let's just call it extended cloud, for lack of a better word, is predicated on the idea that I also have a network that can naturally and easily, not just bridge, but truly multi-network, interoperate, inter-network with a lot of different cloud sources, but also a lot of different cloud locations. And there's not a lot of technologies out there that are great candidates to do that. And I look at NSX and I'm wondering, is that going to be kind of a, and I don't want to take the metaphor too far, but is that going to be kind of a new TCPIP for the cloud in the sense that you're still going to run over TCPIP and you're still going to run over the internet, but now we're going to get greater visibility into jobs, into workloads, into management infrastructures, into data locations, data placement, predictive movement. And NSX is going to be at the vanguard of showing how that's going to work. And the security side of that is especially to be able to know what is connected to what and what shouldn't be connected to what. And to be able to have that built-in network layer. Well, we heard segmentation, micro-segmentation. Yes, absolutely. Yeah, they need stateful structured streaming, in other words Kafka, Flink, whatever. They need that to be baked into the whole NSX virtualization layer. That much more programmable and that can provide that much better a target for applications. All right, last question, then we got to wrap guys. David, as you walk out the door, get in the plane, what are you taking away? What's your last impression? My last impression is one of genuine excitement, wanting to work, wanting to follow up with so many of the smaller organizations, the partners that have been here and who are genuinely providing in this ecosystem, a very rich tapestry of capabilities. That's great, Jim? My takeaway is I want to see their roadmap for Kubernetes and serverless. There wasn't, last year they made an announcement of a serverless project. I forgot what the code name is. Didn't hear a whole lot about it this year, but they're going up the app stack. They got a distribution. They need a developer story. I mean, developers are building functional apps and so forth, and they're also containerized. They need a developer story and they need a serverless story and they need to bring us up to speed on where they're going in that regard, because AWS, they're a predominant partner. I mean, they got Lambda functions and all that stuff. That's the development platform of the present and future. And I'm not hearing an intersection of that story with VMware as a story yet. So my last thing that I'll say is that I think that for the next five years, VMware is going to be one of the companies that shapes the future of the cloud. And I don't think we would have said that a couple of years ago. They wouldn't. I agree with what you said, yes. All right, so this has been the Wikibon research leadership team talking about what we've heard at VMware this year, VMworld this year. A lot of great conversation. Feel free to reach out to us. And if you want to spend more time with Wikibon, love to have you. Once again, Peter Burris for David Floyer and Jim Cabilis. Thank you very much for watching theCUBE. We'll talk to you again.