 Live from Las Vegas, it's theCUBE. Covering VMworld 2017, brought to you by VMware and it's ecosystem partner. Okay, welcome back everyone. Live in Las Vegas, we are here in the VMware Village, VM Village, we're kicking off day two, our ending day two, wrap up here, this is theCUBE. I'm John Furrier with Dave Vellante with our wrap up guest, Peter Burris, head of research at wikibon.com, Stu Miniman co-host of theCUBE and analyst wikibon. Guys, great day two in the books, another day tomorrow on the wall to wall coverage, events tonight stacked up. Last night, great hallway conversation, we covered that on our intro this morning. Day two was about Michael Dell, Pat Gelsinger conversation, a lot of announcements with Google crashing the party at a one-on-one with Sam Ramjay who's VP of product management, head of developer platforms, not just Google Cloud, they're bringing all the developers to bear. Peter, this telegraphs your point about Google, not to be taken lightly. Oh yeah, well look, but look, we talked about this earlier and there are some very real things that have yet to happen, but just contrast this. Three years ago or two years ago, if you talked to the Google Enterprise Group and you said to them, well, you have some really great opportunities. What are you going to do with them? They'd say, whatever the consumer guys give us, we'll repackage. And now if you see what Google's doing, they're actually going out, creating new partnerships, creating new technology, they're actually acting like a real enterprise company. It's a transformation that's happening very fast. My guess is there's an enormous amount of stuff going underneath the covers in the new Google campus, but it's interesting to see that company become a real enterprise player before our eyes and it's going to be a consequential player. Stu and Dave, I want to get your reaction to something because we saw our observation this morning, Peter, I think you started out by saying the whole world's upside down, a new way to engage the enterprise. You mentioned VMware transforming as a company similar to what IBM did many years ago, but we saw Michael Dell here. We heard Sanjay Poon and the COO came on talking about how they're collaborating. He even made reference to the emerald almost merging with reinventing, kind of hinted to that where they would be showing up at their show, maybe working together closely. A new kind of relationship is building on how to be competitive, yet Google and Microsoft have to kind of catch up. And the question on the table is, is there diseconomies of scale in that? Can Google get the enterprise IQ to truly understand the digital transformation and bring that developer community and that operational scale of Google? And can Microsoft bring that enterprise knowledge of office, windows, et cetera, to the cloud at the speed of the disruption at the same time, change how they engage? Stu? Yeah, so John, it's pretty typical we talk about how when some of these technologies started, it's like, oh wait, no, they're not ready. Don't look at them. Public cloud was a dirty word at VMworld a couple of years ago now. We're embracing it. I'm sure you talked about Michael Dalitz. He's big partner of Microsoft's. They're going to be doing Azure Stack. The Amazon dynamic is amazing. John, last year we said, Pat Gelsinger, hey, Pat, you want to come on the Cupid re-invent? He's like, oh, are you inviting me? Well, we had Sanjay Poonan on at that show. Absolutely. I've mentioned it. I was at the AWS Summit in New York City. VMware was a partner presenting there. People are interested to look at it. How this bakes out, there was an interesting thing. I saw a tweet went out from Kelsey Hightower, a lot of people in the open source community. It's like, one technology killing the other. And we always said, VM's going to cure bare metal and containers will kill that and serverless will kill that. And it's a joke, of course, because nothing ever dies in IT. It's all additive. The hotel of California. It's, you know, we'll talk to IBM and talk about their Z customers that are running mainframe. Oh, and you can run Linux and containers on that too. So it is, IT is a complex world. We're all going to have to kind of live in this space. Heck, so many of our guests that we have on this program, we're interviewing them at the second or third or more company that they've been at. So it's the ebbs and flows of the people and the technology and it's fun to document. Well, the question is, is it a zero sum game? Yeah. And so I've talked to a number of service providers. Some of the 4,400, I haven't talked to 4,400, but a handful, and they're frankly not happy about the AWS deal because they're all trying to compete against AWS and they're just saying, you know, their narrative is, oh, it's a big straw that's just going to suck everything out. But the question is, is it a zero sum game? Or is the, I mean, we had data centers booming, enterprises booming. Is this one of those, you know, boom years that everybody benefits? Just, just, just note on that. So VMware got out of vCloud Air. That actually made those 4,400 happier because now VMware is no longer a threat as well as a partner. So that service, the Amazon stuff and the Google stuff is bringing back. Yeah, they never liked vCloud Air. And yes, getting out is a good thing. And then next day, boom. But here's the issue that's, here's the real, to me, to my and the real other part of the answer is, does a knowledge of the enterprise and how the legacy and traditional applications matter? And the reality is to Stu's point, since you can check in, but you can never leave. It matters. That at the end of the day, it's going to matter. Your knowledge of how transaction processing works is going to matter. Your knowledge of how Z-Series handles, you know, handles storage or handles data is going to matter in the enterprise. And so the reality is, there is going to be, it's not a zero sum game. There's going to be a lot of, because of the complexity, there's going to be an enormous premium place and experience, how you package that experience, how you present it. It's going to be a lot of niches in this marketplace. A lot of ways of getting to that scale, but there's no question that what's most important is getting there fast and early. And the big three, obviously, Amazon, Microsoft, Google, all bring something different to the table. And the question is, what view of the cloud do they bring? VMware taps out of the cloud game with vCloud Air, has an arms dealer like approach, Dave. We talk about being an arms dealer. You know, Sanjay was teasing out like, hey, you can have these cloud, these native clouds, not cloud native, native cloud players, one, two, and three, suck in the straw at the top of the power law. But then VMware could service an entire set of new clouds. I call maybe second tier or secondary native clouds, where, hey, someone's got, I saw Jeff Frick and I were talking about a drone farming cloud, with drones that have applications for farms. It's going to be specialization. That speaks to a new set of service providers. And the question is, is the cloud service provider market about to explode? What do you think? Explode? Meaning, great, grow, big, does that long tail fatten out the neck and the torso? Yeah, because at the end of the day, at the end of the day, where you are located matters. Your ability to bring together classes of services is going to matter. And being able to enfranchise and federate all those things is going to matter. And if it is truly cloud, if it's a common cloud experience, the cost to a customer of getting into that is going to be relatively low. And so, what you're really testing is, is the cost of getting into a specialized cloud going to be more or less than the cost of going with a general cloud and start adding things. And there's going to be a lot of opportunity to serve particular classes of companies by different characteristics. Let me draw an analogy for you. That we talk about part, this is, I'm going to get political for a second, but we talk about partisanship in the US, right? And many years ago, people said, oh, the internet is going to democratize everything and it's going to be this wonderful, well what really happened is the internet made it possible for media companies to enfranchise audiences independent of geography. And now we've got highly specialized media sources that are all pertaining to a particular audience. Why wouldn't we expect, and software is effectively media, why wouldn't we expect to see the same exact economics and dynamic happen for some of these specialized... Make software great again. That's my motto. To that point, services has always been a highly fragmented and highly specialized market cloud is services. And I would expect, yes, to answer your question that you're going to see a lot more service providers explode, but they better have a differentiation strategy relative to AWS. So the TAM conversation around that's cool, but what's really happening here that was getting a lot of traction, and we talked about this earlier about the true private cloud report. I asked Sanjay Poonan, and then I talked to Sam Ramjay at Google who heads up the developer platform in product management. To your quote, this morning, a lot of IT's been driving costs out of business now or putting revenue on their agenda. He goes, really? And I asked him, what's your metric for success at Google? And he started to think about it and went back to the business value of technology. So this, I know there's a research area that I want to give you a chance to describe. What's the cutting edge metric around the business value of technology? Because in the cloud, magic quadrants don't matter. You can, the scoreboards are changing. At the end of the day is what value does technology contribute to business that drives top line revenue? Yeah, cost containment, I get that, but revenue. Well, so the traditional way of thinking about ROI or business returns or business value is you say, I'm going to say for a given application for ERP, I'm going to, which is the numerator, which is the benefit, so that's why I classify it. Now I'm going to look at the denominator, which of the different configurations of technologies make that given set of systems most have the highest return and it all becomes a cost question. So really where this goes is that increasingly what businesses are looking at are saying my customers are demanding digital engagement, my partners are demanding digital engagement, I'm going to use my data differently, I'm going to infuse, I'm going to turn products into services, I'm going to do all these different things with data, that's where the revenue side comes into play. Now, can you argue that it all comes back to cost and automation? Yeah, there's things you can do, but at the end of the day the question is, what does your customer see? Does your customer see a better service or a better capability, a differentiating approach to doing things? That is the non-standard numerator in the equation and that's where IT is increasingly, and with the business is increasingly focusing its attention. So as the increasingly what's happening is we're looking at a common denominator, Amazon's pricing and Google's pricing and all these other guys pricing is going to moderate to a set of common metrics and that means that now we can start talking about the numerator and how doing the numerator differently is going to be different. Okay, so let's take that and take it to the stew and Dale, I did comment on, we heard this race to the bottom, race to zero. That's not happening, your true private cloud report shows that the SaaS business and true private cloud just by itself is bigger than I asked. And we never believe that, we've never bought into it. And you know, it's funny, in some of the analyst sessions, you get to talk to some of the customers and talk to some of my peers here, something we hear from a lot of companies, not all of them, but cost isn't number one on the list, usually it's agility, it's entering the business, it's being able to move faster. Cost of price, of course, does matter eventually, but it's that being able to react faster, that agility that needs to go there. I mean, and there's all of these new technologies that are going to line up. Heck, we're spending all this time talking about public and private cloud and edge computing is just going to, completely change that landscape even more. As we go forward. And look, and the other thing is Amazon sets a pretty high price umbrella. I've never bought into the race to the bottom. I always said Amazon's going to be more profitable and everybody, Amazon's an infrastructure, they're an infrastructure company with 30% operating margins, which is like a software company. I mean, it's basically VMware's operating margin, maybe VMware's a little higher. And of course, Amazon has a much higher capital cost, but there's a big price umbrella that Amazon has created. That's an awesome opportunity. I'm interested in what you guys think about the recent momentum behind VMware. In the last two years we've seen a total change, right? Two years ago it was kind of negative, negative growth. And now it's tailwinds, positive momentum. Is this a product cycle? Is it expanded ELA's kind of a one-time thing? Or do we think this is a sustainable trend? I mean, I've said, I think the stock is under value. Am I right? Is this sustainable? I think you're right. I mean, to me, my observation is, I'll let you guys comment on it, but my observation is VMware was stuck in the middle of an identity crisis between the virtualization ops side and then trying to do cloud. And then you nailed it on the earlier intro segment where you said, there's no capex there. They got better margins because of it. And by making a decision on not doing cloud and becoming much more of an arms dealer, you can move the ops into the dev, right? And that's been a big stuck on the mud point for VMware. They got great ops, great enterprise, but they just weren't nailing the developer side. And that became a problem. Now you have clarity on the wave. Cloud IoT, I just do pointed out. Now it's very clear what's going on and everyone knows where the game is. Then the shift is going to come to, and this is why the Kubernetes announcement Google today didn't get a lot of applause in my opinion, Stu. I'd love to get your reaction. He said, I don't think this audience can connect the dots yet on that long play of the orchestration. So they're still stuck in, I got my house to clean up. I don't want to get the fluff and the headroom and the future vision. I got problems to do on my ops side. Yeah, I want to do dev, I want to do dev ops, but shit, I got to take care of business. Yeah, so today's question, VMware had reached a certain point. They'd kind of saturated the market for server virtualization. They made a number of bets. Some of them panned out. AirWatch, great acquisition. NYSERA, phenomenal acquisition. NSX, we've talked extensively about that. Push towards the developer community. Well, I think they've understood now. Pivotal's going to handle that. We'll shove that over here. There's not a developer track at this show anymore. The cloud piece, they fumbled it a few times. And now they've kind of understood it. So, kind of a natural progression. They made some moves. The ELA is something that I think they've sorted out. Their licensing agreement, how they have the partnerships with customers. We've talked extensively about some of the pricing. Some of the deck shares. The Mulligan on VirtuaStream, carry on, please. Yeah, so right, it's where they fit, where they partner, the relationship with the ecosystem. And a thing that, you know, what drove VMware to where they are, is those partnerships and the technology partnerships, as well as the channel partnerships. Some of those things I hear, Kubernetes, AWS, VMware and AWS, their partners are like, it's scary. I don't know if I make any money. Is this now VMware and Amazon just go to the bank and they cut me out of the whole thing? So, some of these, it's interesting. Right, most people aren't ready for the container piece. They're definitely not ready. You know, Kubernetes, they hear about it, but it's pretty early, so. Either your reaction, because this really kind of points to what Stu's saying, if you, yeah, I believe what he's saying, to be true, because I agree. They did their homework, they were listening. They weren't sticking their head in the sand to your transformation point. Well, so if you're a CIO and you're looking at a whole bunch of change, my business is, my business is stance towards digital and technology is changing. My relationships with the business are changing. I now foresee that I'm going to have to reorganize my IT organization to take advantage of things like hyper-converged and whatnot. So I'm looking at an enormous transformation. In comes VMware, and the first thing out of their mouth is, we really don't know what we're doing. We're throwing a bunch of spaghetti against the wall. Would you help us sustain these assets until we figure this all out? The CIO is going to say thank you very much. We're in Microsoft. So what's happened is VMware decided to get serious and stable. They decided to make some bets, and a lot of the bets that they're making right now, we're seeing it in the show, we're probably not going to pan out. But that's okay, because it's still- But the big ones are. Well, we think so, we think so. We think NSX as well. Look, all the, still listen. We don't have to go over them again. But what we are seeing is, and you know, Michael Dell and Pat and all the executives- They're paying attention. They're over and over. Open with an opinion. It's very clear that businesses like the VMware opinion. I think Stu and I and all of us probably agree that they could probably go further with that opinion. They could probably lay out an even better vision of what the cloud experience is going to be as they foresee it and how they're going to engineer to it. But it's very, very clear that customers today are saying, I got all this installed. I'm willing to continue to invest in care, taking all this VMware stuff because they have done a better job of laying out what my options are. Whereas a few years ago, the options were all over the map, which means they had no options. Yeah, they were groping for something. Okay, we got to wrap it up. I wanted to go around the whore in the final piece. We're going to go out tonight. We're going to party. We're going to socialize, stay up all night long, talking to people, getting the data. Not all night. We'll be in bed by 11. I'll be in bed by 11, I hope. I hope. Great conversations last night. A lot of hallway conversations. A lot of good chatter. So around the horn, most compelling thing that you heard, not in a session, in the hallway, through conversations and interactions. Peter, we'll start with you. Most compelling thing that I heard is there's some new stuff coming in the Google universe. That is going to have, potentially have a pretty significant impact, ultimately on how enterprises look at Google. I found that some interesting stuff there. The most compelling thing, just very simply, on the VMware side of things, was the, probably coming out of some of those conversations we had with Chad this morning, Dave. And the idea of, the idea that increasingly, you're going to look at these platforms. So a platform, a set of platform whores are on the horizon, where it's going to go back to what we were looking at many years ago, in certain respects, but written much larger. But that increasingly the way that people are going to evaluate the quality of a platform is not intrinsic to the platform, but how well it binds to other platforms. That's probably the most important statement that I heard out of, on the floor today, over what's happening. Stu. Yeah, it's, continue on kind of Peter's theme is, we're starting to see really, you know, it's gelling, some of this multi-cloud messaging. You know, been really teasing out with a lot of people, once again, when you get to talk to the practitioners as to what applications are they building? Where do things go? How are they moving around? And, you know, VMware is a trusted partner, one that they've really turned to for a lot of this. And the customers at least, are optimistic about what they're hearing. I've heard a bunch of them that are really excited for the VMware on AWS. More than I expected to hear. And, you know, it'll be interesting to see. It's been interesting. We've kind of been saying Microsoft, maybe there. You know, when we go to Dell EMC World, they're talking a lot about Microsoft. Microsoft Ignite's coming up. You know, those be a huge push. We've said for years, who has the best hybrid strategy? It's got to be Microsoft. Hands down. So, VMware. Although we haven't mentioned Oracle, it's going to be interesting. Oracle's still not out of this. Yeah, absolutely. I always say, follow the applications, follow the data. Oracle, Microsoft, huge application portfolio. VMware, still doesn't happen. No, I haven't heard one person talk about Microsoft or Oracle here. Not one. I want to chime in. I have heard about Microsoft but not Oracle. Yeah, me too. I've spent the last 24 hours have talked to a number of customers. And I will tell you, they're struggling to move fast. And that's, I like good news for VMware and Dell EMC because, you know, all the vision that's put forth and all this cloud native stuff and they're really having a hard time digesting a lot of this stuff. You've been saying it for a while. Hybrid cloud is BS. Nobody's doing hybrid cloud because it's sort of been defined in early days like federated apps. Nobody's even thinking about it, not even close. Yeah, multi-cloud because I'm getting inundated with all these clouds. So they're really having a hard time moving. So I think that's a good trend. Dave, I heard a great line on this. VMware is moving at the speed of the CIO. Yeah. That's a great line. That's a, you know, kind of double-edged comment. But, you know, absolutely, you want to stay at least, you know, up with most of your customers. I won't say I said hybrid cloud was BS. I did say hybrid cloud was doing hybrid cloud. I mean, because it's not ready for prime time, in my opinion. It's a way station, John. Yeah, it's a halfway house or it's a way station. What do you want to call it? It's a total sack. Sanjay, use that line today. Okay, my final observation is more of a, kind of an epiphany for me that kind of wasn't really, was a blind spot, but it was an awakening. The customers I've been talking to are really struggling with the merging of multiple stacks, hardware and software in new use cases that have been untested and undocumented and that's causing to the speed of the CIO conversation of, wait a minute, we can't just deploy some of this stuff at scale until we do our homework. We got to get the hardware stacks and the software stacks working together. We heard it a lot. That's been the number one hallway conversation. That means there's a lot more work to do on that front. Well guys, but it's a working together part. It's that how they bind together. It's in these new use cases are working together and this is not a software vendor and a hardware vendor. It's all going to be a data vendor at the end of the day and we'll see who can bring the stacks together. Okay, Pat Gelsinger. We had Michael Dale, Sanjay Poon and great day guys. Great stuff. Let's go hit the hallway conferences and go hit some of these parties and get more data for you guys. Thanks for watching theCUBE live in Las Vegas. Wrap up of day two here. I'm John Furrier, Dave Vellante with Peter Burris with Stu Miniman, this is theCUBE. Thanks for watching.