 Live from San Francisco, celebrating 10 years of high-tech coverage, it's theCUBE. Covering VMworld 2019. Brought to you by VMware and its ecosystem partners. Welcome back, everyone. Day three CUBE coverage here in San Francisco for VMworld 2019. I'm John Furrier, Stu Miniman here with Dave Vellante. Day three kickoff. We have two sets, wall-to-wall coverage. Guys, this is the time where we get to, you know, take a deep breath, two days under our belts, look and reflect on all the news we've covered in our two last analysis sessions, but also kind of riff on. We got two nights in hallway conversations. We learned a lot at the parties. I mean, Stu, I learned a lot last night. Dave, I know you learned a lot, Stu. You're talking about some of the things that, the chatter, certainly the Twitter sphere hashtag, VMworld, a lot of action on there, but it's the hallway conversations. It's the parties where people have a few cocktails someday that, you know, you start to hear the truth. The real deal comes out. No doubt, and again, John, Stu, there's real concern over, from the practitioners we talked to, about this acquisition spree. Are they going to be integrated? Are they going to just throw all this stuff at us and keep jamming products and services down our throats? Or is this going to be a coherent set of solutions that solves our problem? We also had a little interesting side conversation about, you know, Snowflake, Frank Slutman's new company and how basically Frank is bringing back the pirates from data domain and from ServiceNow, Mike Scarpelli's over there. He's a rock star CFO. Beth White is eventually, is back over there and Frank Slutman, he's the guy who takes companies from, you know, 100 million to a billion. So that's going to be very interesting. This is some serious money-making going on there. We have been following his career for a number of years now. We watched him, like, take data domain. We watched him pull that rabbit out of his hat with the sale, with NetApp and then EMC swooped in and then we saw what he did with ServiceNow. We've documented, this is an individual to watch. You know, for sure. He's a world-class management team member. I mean, he's executes. Yo, yeah, no doubt. And he has a formula that's been proven and time and time again. And to me, the biggest testament to Slutman is the continued success of data domain after he left. He really helped clean up EMC's data protection mess. And then the second thing is, look at ServiceNow's performance after he left. They haven't missed a beat. And yeah, John Donahoe, great executive and all, but it's because Frank Slutman had everything in place and that was a really well-run machine. And they got a nice little Oracle-like business model. Yeah, no, you're right. They kind of, you know, the big complaint now is, wow, your price is too high. Bring it to Oracle. Yeah, that was true. Stu, what have you learned? What are you hearing in the hallways? I mean, a lot of chatter. Yeah, so John, we've been reflecting back a lot. It's the 10th year of theCUBE here and back here in San Francisco, the new Moscone, our third show that I've been at this year in Moscone. And we always track year to year, but since it's been, what, four or five years since we were here for VMworld, when I talked to the average vendor, when I talked to, you know, the analysts here, we were like, oh, thank goodness, we're not in Vegas. When I talked to the average attendee, they're like, oh my God, what happened to San Francisco since last time we were here? It is too expensive and the experience walking around San Francisco has really, not nearly as nice as it might have been five or 10 years ago, and many of them, we were talking to a woman that runs an event that has been in Vegas in San Francisco and she said, oh, we did in San Francisco and got tremendous feedback. Don't do it there again. Bring back to Vegas, both for cost and the enjoyment of being around the environment. It's a shit show here. San Francisco is horrible right now. I got to say, Stu, you're right. I was walking this morning from my hotel, literally a homeless person passed out in the middle of the sidewalk. You smells like urine. It's pee and rot. It's just, I mean, it's really bad. There's tents now. I mean, the city of San Francisco has got to do some Moscone, by the way. It's been rebuilt, it's awesome. So, you know, in terms of the new Moscones, Stu, that's a serious upgrade. Hotel rooms are scarce and just the homeless problem is just ridiculous. I don't know what they're doing here. So, John, one of the other big things when I was reflecting coming into here, two years ago, when VMware really started down right before the VMware and AWS announcement, they'd made a big announcement with IBM because they had sold off the Cloud Air to OVH. And for two years, OVH was a big partner, talked about that transition, said we handed off this great asset. OVH isn't here at the show. I was like, oh my gosh, you know, that was such a big story and other companies, like Nutanix. Well, let's talk about who's not at the show and why. Yeah. OVH, why aren't they here? They aren't here because, well, they've got customers, more of them are in Europe. That was supposed to be a big entry into the United States. Obviously, it wasn't as valuable for them to be here, even though I'm sure they are still, you know, part of that service provider ecosystem they have. Another big one for us, and we've had on theCUBE Nutanix. You know, we've had D. Raj Pandey, first time we had him on was at this show. Still the majority of Nutanix customers are VMware customers. I've talked to lots of Nutanix customers at the event. Even part of the analyst event, some of the customers I talked to were like, oh yeah, my hardware stacks Nutanix. And I'm using NSX and I'm using other things there, but they are not here. They are not allowed to be at the show. And- I mean, they were blatantly told they can't come. They can't come here. They can't come to the regional things. They can't do the partner things. So that relationship is definitely frozen. How about Red Hat? What kind of presence have you seen from Red Hat? Yeah, so there are a number of companies like Red Hat that they are kept at a lower level of sponsorship. So they are here, they participate, you know, OpenShift of course is, you know, big enemy for CloudNative. Lots of OpenShift runs on vSphere. So many of those companies that are part of the ecosystem, but not the ones that they want to celebrate and put front and forward. So it's always interesting to kind of walk around on those. Even, you know, Microsoft is an interesting relationship for decades with VMware. You know, of course, Azure they partner with, but Hyper-V was long a competitor. So, you know, we understand those competitive relationships there. It's getting interesting, Stu and Dave on the ecosystem. Jerry Chen, Dave, when Stu and I interviewed him yesterday on the other set, mentioned that the ecosystem reinvents itself, the community. The question now is, with Dell EMC and Dell Technologies, obviously, we heard Michael Dell essentially laying out his plan, which is he's trying to keep people distracted, but the bottom line is he's got his top people putting together the cloud, right? The cloud service provider model. So, you know, that's what he's going to be a big impact. VMware, the crown jewel of Dell Technologies, certainly he's looking more and more like it's... Well, and yesterday, you remember the first VM world we did in 2010, it was Dell, I mean, of course, EMC owned them at the time, but it was Dell, it was HP, yes, the EMC was there, but it was NetApp. I mean, everybody sort of had equal standing. Yesterday at the keynotes, it was, you know, project dimension, you know, a VMware cloud on Dell EMC and long keynotes. Big demos. Yeah, data protection's baked into the VMware offer. Yeah, so it's all very heavily, you know, Jeff Clark has his thumb on, you know, the Dell EMC folks pushing that through VMware. Michael's orchestrating the whole thing. Pat, obviously, is allowing it. I was sitting in the audience next to some folks from NetApp, they were like, this is kind of a bummer. Calvin Zito from HPE tweeted, wow, how to like stick it in the face of your ecosystem partners. He then later went on Facebook saying, hey, I love this ecosystem, so it's sort of balancing it out because, you know, he wants to be a good citizen, but clearly the ecosystem partners who basically brought VMware, you know, to the position where it's in through distribution are a little ruffled right now. You can't blame them, but at the same time, the mandate is clear. Michael Dell is driving his products and his solutions through VMware, period of the end. And, you know, if you don't like it, leave. Right, they had such great success with vSAN and VxRail and that joint product development and go-to-market, if they can replicate that with a number of other solutions, they get that, those synergies, if you. Pat said yesterday. You don't like it, leave is worse than that. They say if you don't like it, you're not invited. That's right. You're out. But how about what Pat said yesterday in theCUBE about when they announced, and when heavily leaned into vSAN, he said publicly that Joe Tucci was pissed and, you know, they were going at it. So that shows you the change, right? I mean, so EMC when it owned VMware, I was very cautious about allowing VMware as a software company to drive value. VMware now is just acting like a software company. Going hard. I mean, I learned last night, Stu, and you're going to appreciate this. I learned that the top executives of VMware are looking heavily and working hard at understanding and driving the Kubernetes cloud native thing because this is not a throwaway deal. This is not a, you know, far anything. They are investing. They get their top brass tech execs on Kubernetes, Heptio, two big players, Joe Beta, Craig McLaughlin, who are key alumni as we know them, interviews this day one. But I think the cloud native thing is going to be interesting. And I think it's going to be an evolution. I think there's going to be a very dynamic road. I think it's going to be a series of course corrections, but directionally they're all in on it. They're going for it. I mean, they're not. Well, and actually I had a, you know, good discussion with Chad Sackich, you know, good friend of the program, now working at VMware for the first time, but came from EMC, worked at Pivotal, and he said culturally, such a gap between VMware, don't have to touch your app, you know, move everything along, lift and shift is nice and easy versus Pivotal, you know, must go completely, you know, dual programming, you know, agile, everything there, so bridging those because there's multiple paths. And the Ray O'Farrill announcement is there will be cloud native stuff that won't necessarily go to VMs. We're going to retool VMs to now be a platform for Kubernetes, so that they have a few paths to bridge or to build towards the future. Here's the interesting strategy discussion that I- And Ray O'Farrill was now running cloud native. Yeah, that's right. So here, this is, and this really ties in. The interesting discussion that I had with some folks was that you've essentially got, well, then Jerry Chen brought this up last time we had him on it at re-invent. Because we have a conversation all the time about does Amazon have to go up the stack? And Jerry Chen made a real good point. You are the stack. He said, look it. They're not going to become an ERP software company. What they're going to do is give tools to the builders so that they can disrupt ERP. They can disrupt service now. They can disrupt Oracle. That's their strategy, at least for now. Okay, so what does that say? I think the strategy discussion inside of VMware and Dell is about, all right, whatever. Cloud's going to be 35 to 50% of the market. Fine, and the cloud native app's great. But you got this, you know, mission critical. ERP is an example, database apps that are on-prem. What we have to do is keep them there. So we're going to sell to the incumbents and we're going to give them cloud native tools to modernize those apps, to build new apps on-prem. And that's the, that is the collision course that's coming. So the big question is, can the cloud native guys and AWS disrupt that huge, install-based ERP- I mean, I've always said Amazon is like the way that's coming in. Tsunami's coming in. Who's going to build that sea wall to stop it, right? And that's essentially the only hope that these guys have. You look at all the competitive strategy with Oracle or whoever, you just got to stop it. You can't like- It's a sea wall. You can't compete at it. You can't compete at it. They're building a sea wall. And I would say is that, you know, their only hope at this point is to, you know, get in the game because, see Amazon is the stack. They're not really moving up the stack. You hear that from Cisco and Dell and other people. That's where, it's a game of musical chairs right now. The music's, you know, there's still a lot of chairs left but soon the chairs are getting pulled away and Cisco, Dell, EMC, VMware, they're all fighting for these big chairs. And one thing we talked about yesterday is that VMware is very directional product-driven. In other words, they pick a direction as a statement of direction and don't really have a lot of meat on the bone on the product side. Cisco is actually in market with service providers. They're in market with networking, Stu. There's no vapor there. That's installed base. It's an incumbent business. They have developers. Yeah, and so Pat talks about Software Defined Data Center. Software Defined Networking. I mean, come on, really? I mean, they're getting there but they don't have the complete solution. I'm excited to, Cisco. Coming into this week, I expected to hear a bit more about the progress and all the customers of VMware on AWS and feel like VMware actually downplayed the AWS. We know what a strong partnership it is at every Amazon show we go to and we go to a lot of them now. There's a big presence there and I've talked to customers that are starting to roll out and move there but it felt like, you know, as Dave, as you pointed out, there are some messaging differences when you talk about multi-cloud and how they're positioning it. So, you know, put those together. If you're Amazon, you're not happy with VMware. Go into Microsoft, the Dell Technologies World, the big announcement, that was positioned at a cloud foundation, although it wasn't a joint engineering but the press picked it up as, oh, the Amazon deal has been replicated with Microsoft and Google. I mean, you got to be hurt if you're Amazon. So I've just been taking notes this event. I've noted at least five major points of difference between AWS, what they're saying and their philosophy in VMware. So AWS, we know, they don't talk multi-cloud. They've told their partners. If you're doing joint marketing with us, you cannot say multi-cloud. AWS had reinforced, John, we saw this. Stephen Schmidt said that this narrative that security is broken doesn't help the industry. Security's not broken. You know, we're doing great. The state of the nation is wonderful. AWS, I agree, by the way, that's not the case. I agree with Pat saying security's broken. It's a do-over. VMware wants to be the best infrastructure and developer software company. Who's the best infrastructure and software development platform? AWS, VMware wants to be the security cloud. Who's the security cloud? AWS, and then they talked about 10,000 cloud data centers. Are those really cloud data centers at VMware? And the last one was, and this was a little nuance, VMware's talking about, we know about migrate and modernize, lift and shift and then modernize. VMware's now talking about modernize and then migrate if you want to. You know, it's totally in conflict. This is a collision course that's coming up. Look at it, look at it. The data center looks like it was going away, right? To the data center staying. That's music to Michael Dell's VMware's ears. They live in the data center. Stu, you pointed this out yesterday. The data center goes away, so there's VMware's business. So one of the things I'm surprised, I'm wondering, you both have talked to some of the service provider, telco pieces of VMware. They're doing that project dimension, which is the VMware stack on Dell that looks just like Outposts. And I know they've had deployments on this for months. If I was them, you know, everybody's hearing about Outposts and talking about it, VMware's like, we're already doing it. And this has you in that Amazon ecosystem. It might be a little strong for the Amazon story, but have you been hearing any about that this week yet? I think they keep a lot of cars close to the chest, but it's clear from the announcements that they're doing, certainly Dell, like the VMware on Dell EMC cloud or whatever it's called, it's not a cloud, but it's their infrastructure. That is essentially a managed service that's going to be really strong for IT people, because I think that the value proposition of going to IT and saying, we have this, you don't need to do anything, it's very strong. I mean, because they don't want them. Yeah, and just to differ, because this, the project dimension, it is that single, that thinner stack, like what we saw in Outposts and the Amazon video, as opposed to the VMware cloud on AWS, which is the full CI or HCI stack on it. I haven't heard anything still on it. Well, but the conversations I had from VMware's standpoint, they can make money on that managed service. That's why it's the preferred partnership, right? And so that's, they're part of their cloud play. If you don't have a public cloud, I said this yesterday, you have to redefine cloud and you have to get into cloud services. That's what's happening. And it's exactly what's happening. And what I like about what VMware is doing is they are transitioning their model to a SaaS based model. Now it's only 12 and a half percent of their revenues today, but both Pivotal and Carbon Black are going to add a billion dollars next year to that subscription base, three billion dollars in year two. And so, Pat said the other day, I think we can get to 50-50. I don't necessarily think in the near term we're going to go beyond that. It's not the Adobe strategy. I mean, we can be critical of VMware in some areas, but I got to tell you their core strength that they went to is software operators on the data center for enterprises. That's been a great strategy focusing on their core, building from there, as Jerry Chen pointed out, adding other products. So, they're a software company. So I think they've really got a good solution and the data shows that people are increasing their spend. So John, just one piece on that because I had a couple of really good conversations with customers, customers that would deploy VCF. So they've got the full stack and they're so using HCI, but not necessarily on Dell hardware. Could be Cisco hardware. Could be HP hardware and the like, or they're buying NSX, but the virtualization team owns it and they get kind of put in a box. The storage team says, that's not the array I'm used to buying. Well, maybe I'll put a pure storage box and put it in between. The networking team says, I'm refreshing my Cisco hardware. We're like, but we have NSX and it's great. Well, you can use NSX over there. We're going to use ACI over here. So the term I heard from a number of customers is organizations still have hardware-defined roles and they're trying to figure out how to move to that software world which hurts me because I spent years trying to get beyond silos and helping people move through those environments and still in 2019, it's a big challenge. That organizational shift is, we know how tough that is. So just a couple of points on the data because you're right, there are some countervailing trends though. So yes, the people are spending more on VMware in the second half, but at the same time, the data shows that cloud is hurting VMware spend. So that's kind of gets interesting. Are containers going to kill VMware? No, there's no evidence that containers are hurting VMware spend. But there's clearly risks there as we've talked about. Who's best positioned in multi-cloud? Well, it turns out the guys with the public cloud are best positioned in multi-cloud Google and Microsoft. And then the pivotal thing is interesting and it ties all this in. So the data is actually really interesting. It's like you're seeing tugs at both sides and I think your notion about the C wall is dead on. That's exactly what they're doing. Yeah, you see that with Oracle's trying to stop Jedi. They can't win, they just want to stop Amazon just with the tracks. Dave, great data, great reporting. Stu, good observations. Get all the data at night in parties and we're going to certainly keep doing that. Day three of wall-to-wall coverage here. Hugh bringing you the insights and interviews here. Live from VMworld 2019. Stay with us for more after this short break.