 From the CUBE studios in Palo Alto in Boston, connecting with thought leaders all around the world, this is a CUBE conversation. Everybody, welcome to this week's CUBE Insights powered by EPR. My name is Dave Vellante, and we've been reporting every week really on the COVID-19 impact on budgets. Sagar Kadakia is back in with me. Sagar, it's great to see you. Really, you're very welcome. Sagar is of course the director of research at EPR, our data partner. And man, I mean, you guys have just been digging into the data or a code just to reiterate we're down, you know, roughly around minus 5% for the year. The thing about what we're doing here, and where they want to stress to the audience, that's going to change. The key point is we don't just do a placeholder and update you in December. Every time we get new information, we're going to convey it to you. So let's get right into it. What we want to do today is do kind of part two from the takeaways that we did last week. So let's start with the macro guys. If you bring up the first chart, Sagar take us through kind of the top three takeaways and just kind of reiterate where we're at. Yeah, no problem. And look, as you mentioned, what we're doing right now is we're collecting the pulse of CIOs. And so things change and we continue to expect them to change, you know, in the next few weeks and the next few months as things change with COVID. So just to kind of give a quick recap of the survey and then kind of going through some of our top macro takeaways. So in March, mid-March, we launched our technology spending intention survey. We had 1,250 CIOs approximately take that survey. They provided their updated 2020 versus 2019 spending intentions, right? So effectively they first gave us those 2020 versus 2019 spending intentions in January. And then they went ahead and updated those based on what happened with COVID. And then in tandem with that, we did this kind of COVID-19 drill down survey where we asked CIOs to kind of estimate the budget impact of COVID-19 versus what they originally forecasted in the year. And so that kind of leads us to our first takeaway here where we essentially aggregated the data from all of these CIOs in that COVID-19 drill down survey. And we saw a revision of 900 basis points. So down to a decline of 5%. And so coming into the year, the consensus was about 4% growth. And now you can see we're down about 5% for the year. And again, that's subject to change. And we're going to again, re-measure that as we kind of get into June, July. And we have a couple of months on our belt with the COVID-19. The second big takeaway here is the industries that are really indicating those declines and spend retail, consumer, airlines, financials, telco, IT services and consulting. Those are the verticals, as we mentioned last week that are really seeing some of the largest pullbacks and spend from consumers and businesses. So it makes sense that they are revising their budgets downwards the most. And then finally, the last thing we captured that we spoke about last week as well as a few weeks before that. And I think that's really been playing out the last kind of week and a half with earnings is CIOs are continuing to press the pedal on digital transformation. We saw that with Microsoft with service now last night. Those companies continue to post good numbers, continue to see good demand. What we're seeing and where those declines that we just mentioned earlier are coming from, it's the legacy, it's the on-prem, it's the peer place. There's such a concentration of loss and deceleration within some of those companies. And we'll kind of get into that more as we go through more slides. But that's really what we need to focus on is the declines are coming from very select vendors. Yeah, and of course, we're in earning season now and we're paying close attention to that. A lot of people say, I just ignore the earnings here. You got the COVID-19 mulligan, but that's really not right. I mean, obviously you want to look at balance sheets. You want to look at cash flows, but also we're squinting through some of the data. Your point about IT services and consulting is interesting. I saw another research firm put out that services and consulting was going to be okay. Our data shows different. And we're watching, for instance, Jim Cavanaugh and IBM's earning call was very specific about the metrics that they're watching. They're obviously very concerned about the pricing and their ability to book business there. We saw the cloud guys announced. Google was up in the strong fifties. The estimate is DCP was even higher up in the 80% range. Azure, we'll talk about this killing it. I mean, you guys have been all over Microsoft and its presence, high fifties, AWS solid at around 34% growth from a larger base. But as we've been reporting downturns, they've been good to cloud. That's right. And I think based on the data that we've captured, it's people are really pressing the pedal on cloud and SAS with this much remote work, you need to have that structure in place to maintain productivity. Okay, let's bring up the next slide now. We've been reporting a lot on the sort of next generation workload. Cloud 1.0, all about storage and infrastructure as a service compute. There's obviously some database, but there's a new analytics workload emerging. And it's kind of replacing or at least disintermediating or disrupting the traditional EDWs. I've said for years, EDWs failed to live up to its expectations of 360 degree insights and real time data. And that's really what we're showing here is some of the traditional EDW guys are getting hit and some of the emerging guys are looking pretty good. So take us through what we're looking at here, Sagar. Yeah, no problem. So we're looking at the database, state of warehousing sector. What you're looking at here is replacement rates. And so as an example, if you see a company with roughly 20% replacement, what that means is one out of five people who took the survey for that particular sector for that vendor indicated that they were replacing. And so you can see here for Caradata and Cloudera, IBM Oracle, they have very elevated and accelerating replacement rates. And so when we kind of think about this space, you can really see the bifurcation, right? Look how well positioned the Microsoft's AWS is Google, Mongo, Snowflake, low replacements, right? Low consistent replacements. And then of course on the left-hand side of the screen, you're really seeing elevated and accelerating. And so this space is, it kind of goes with that theme that we've been talking about that we covered last week, bifurcation, right? When you think about the declines that you're seeing in spend, again, it's very targeted towards a lot of these kinds of legacy vendors. And we're again, we're seeing a lot of the next-gen players, the Microsofts, the AWS continue to post very strong data. And so you're looking within database, it's very clear as to which vendors look well-positioned for 2020 and which ones look like they're being ripped out and swapped out in the next few months. So this to me is really interesting. So, you know, you've certainly reported on the impact that Snowflake is having on Paradata and some of IBM's business, the old Matiza business. You kind of, you can see that here. You know, it's interesting during the Hadoop days, Cloud Air and Hortonworks, when they realized the kit couldn't really make money on Hadoop, they sort of tried to get into the data management and database. And, you know, you're seeing that is under pressure. It's kind of interesting to me, Oracle, you know, is still not what we're seeing with Teradata, right? Because they've got a stranglehold on the marketplace. So it's kind of hanging in there, right? But then Snowflake with no replacements is very impressive. Mongo, consistent performer. And then Google, AWS, Microsoft. AWS, of course, with Redshift, they did a one-time license with Par Excel, which was an MPP database. They totally retooled the thing. And now they sort of, interestingly, copycatting Snowflake, separating compute from storage and doing some other moves. And yet, they're really strong partners. So, the interesting thing is going on there. Redshift, DynamoDB, yeah, Redshift, DynamoDB, oh, they all look good. All these AWS products continue to screen very well in the data warehousing space. So, yeah, to your point, there's a clear divergence of which products CIOs want to use and which ones they no longer want in their stack. Yeah, the database market is very much now fragmented. It used to be Oracle, DB2, SQL Server. As you mentioned, you got a lot of choices. Amazon, I think I counted 10 data stores, maybe more, DynamoDB, Aurora, Redshift, on and on and on. So, really interesting space, a lot of activity. And that new workload that I'm talking about is taking analytic databases, bringing data science tooling into that space and really driving these real-time insights that we've been reporting on. So, that's quite an exciting space. Let's talk about this whole workflow, ITSM service now, just announced, they've been consistently crushing it. theCUBE has been following them for many, many years. Whether, from the early days of Fred Lutty, Bruce Lutman, the short time John Donahoe, and now Bill McDermott as the CEO, but consistent performance since the IPO. But what are we actually showing here, Sagar? You guys can bring up that slide, thank you. So, our key takeaway on kind of the ITSM, IT workflow spaces, look, it's best in breed, which is service now, or some of the lower cost providers, right? There's really no room for middle of the pack. So, this is an interesting chart. And so, what you're looking at here, there's a few derivatives, so I'll kind of walk you through it and then I'll walk through the actual results is, we're looking within service now accounts. And so, we're seeing how these companies are doing within or among customers that are using service now today. What you're looking at on the X-Axis is essentially shared market share or shared customers. And then on the Y-axis, you're seeing essentially the spend velocity of those vendors within service now accounts, right? So, if a vendor was doing well, you would see them moving up into the right, right? That means they're having more customer overlap with service now, and they're also accelerating spend. But you can see, if you look at Zendes, if you look at BMC, some manage, right? You can see they're either losing market share and spend within service now accounts, or they're losing spend, right? And Zendes is another example here. And what's actually interesting is, and we've had a lot of anecdotal evidence from CIOs, is that, look, they start with service now, it's best in breed, but a few of them have said, look, it's gotten expensive. And so, they would move over to Zendes and then they would look at it versus a cop versus Atlassian. And we had a few CIOs say, look, Atlassian is a quarter of the price of Zendes. And they moved away from Zendes and subsequently went with Atlassian. And so, it's interesting that, during these times where, you know, CIOs are reducing their budgets, that, look, it's either best in breed or low cost. There's really no room in the middle. And so, it's actually kind of interesting in this space. It's an interesting dynamic and a theme. Usually, it's best in breed or low cost. Rarely do you kind of see both win. And I think that's what kind of makes this space a little interesting. Yeah, I've been following service now for a number of years. I just make a few comments there. First of all, you know, Workday was the gold standard in enterprise software for the longest time and you'll be raised, you know, company. And I always considered service now to be kind of part of that, you know, Silicon Valley mafia with Frank Slutman's test. But what's happened is, you know, Slutman did a masterful job of identifying the total available market and then executing with the team. And now, you know, his successors have taken it beyond there. You know, service now's market cap. It's not quite double, but I mean, I think Workday, last I checked, was in the mid 30s. Service now's market valuation is up in the 60 billion range. I mean, they announced just recently, very interestingly, they beat expectations. They lowered their guidance relative to consensus guidance. But I think the street and hoes, first of all, they beat their number and they've got that SAS model, that very predictable model. And I think people are saying, look, they're just leaving meat in the bone so they can continue to beat because that's been their sort of MO these last, you know, several years. So you got to like their positioning and you get, you talk to customers, they are pricey. You do hear complaints about that. But, and they've got a strong lock spec. But, you know, generally, Saga, my experience is, if people can identify business value and clear productivity, they can work through the lock in, you know, and they'll just fight it out in the negotiations with procurement. That's right. And two things on that. So with ServiceNow and even Salesforce, right? They are a platform-like approach type of vendors, right? Where you build on them and that's what makes them such great companies, right? Even if they have, you know, little nicks and nacks here and there, when they report, people see past that, right? They understand their best to breed. You build your companies on the ServiceNow and the Salesforce of the world. And to the second point, you're exactly right. Businesses want to maintain consistent productivity. And I think that, you know, is, is, it kind of resonates with the theme, right? Doubling down on cloud and SaaS. As you have all this remote work, as you have kind of a, you know, questionable or deteriorating macro environment, organizations want to make sure that their employees continue to execute that they're generating consistent productivity and using these kind of best to breed tools is, is the way to go. That's interesting. You mentioned Salesforce and ServiceNow. I've, for years I've been saying they're on a collision course. We haven't seen it yet because they're both platforms. I, I still, I'm waiting for that to happen. Let's bring up the next chart and let's get into networking. We, we, we talked a couple of weeks ago about the whole shift from traditional MPLS, moving to SD-WAN. And this sort of really lays it out. Take us through the data here, photographer, please. Yeah, no problem. So we're just looking at a handful of vendors here. Really, we're looking at networking vendors that have the highest adoption rates within cloud accounts. And so what we did was we looked inside of AWS, Azure, GCP, right? We essentially isolated to just those customers. And then we said, which networking vendors are seeing the best spend data and the most adoptions within those cloud accounts? And so you, yeah, you can kind of see some, some themes here, right? SD-WAN, right? You can see Meraki there, VMware, NSX, right? You see some next-gen load balancing or Cloudflare on the CDN side, right next-gen. And so you're seeing a theme here of more next-gen players and you're not really seeing a lot of the MPLS vendors here, right? They're the ones that have more flattening, decreasing and replacing data. And so, yeah, the reason just kind of going over the slide is, you know, when you kind of think about the networking space as a whole, this is where adoptions are going. This is where spend's going and you kind of categorize it into what we just talked about. You know, networking is such a fascinating space to me because you got the leader and Cisco that has held two thirds of the market for the longest time, you know, despite competitors like Arista and Juniper and others trying to get in there. And of course, you know, of course NSX and the big NICERA acquisition, you know, kind of potentially disrupted that, but you can see, you know, Cisco, they don't go down without a fight and hanging tough there. Let's take a look at the next chart on CDN. You know, this is interesting. You know, you think with all this activity around work from home and remote offices, this is a hot area, but what are we looking at here? Yeah, no problem. And that's right, right? You would think, and so we're looking at CDN players here, you would think with the uptick in traffic, you would see fantastic net scores, right? For all the CDN vendors. So what you're looking at here, and again, there's a few lenses on here. So I'll kind of walk you, I'll kind of walk the audience through here. Is first we isolated only those individuals that were accelerating their budgets due to work from home, right? So we've had this conversation now for a few weeks where support employees working from home, you did see a decent number of organizations. I think it was 20 or 30% of organizations that took our survey that indicated they're actually accelerating spend. So we're looking at those individuals and then what we're doing is we're seeing how is Cloudflare and Akamai performing within those accounts, right? And so we're looking at those specific customers and you can just see within Cloudflare and we track them in security and networking which is probably more of the CDN piece, how consistent and elevated the data is, right? This is spend intensity, right? Not overall market share because obviously Akamai, you know, they're the grandfather of CDNs, they have the most market share. And if you look at Akamai to the right now, you can see the spend velocity is not very good. It's actually negative across both sectors. So, you know, it's not, we're not saying that, look, there's a changing of the guard that's occurring right now, right? Cloudflare is still relatively small compared to Akamai but there's just such a stark contrast here. And again, it kind of goes to what we were talking about at our top macro themes, right? CIOs are continuing to invest in next gen technologies and better technologies. And that is having an impact on some of these legacy and kind of, you know, grandfather providers. Well, I mean, I think as we enter this again, I've said a number of times it's ironic that COVID hit coming into a new decade. And you're seeing this throughout the IT stack where you've got a lot of disruptors and you've got companies with large install bases, a lot of on-prem or a lot of historical legacy and it's very hard for them to show growth. They oftentimes squeeze R&D because they got to serve Wall Street. And this is the kind of dilemma they're in. And, you know, the only good news with Akamai here is it's less bad. Security go from negative 20% to a negative 8% net score. But wow, what a contrast to your point, much, much smaller base, but still very relevant. We've seen this, you know, movie before. Let's wrap with another area that we've talked about which is virtualization, specifically desktop virtualization, EDI, again, a beneficiary of the work from home pivot. And we're focused here right on Fortune 500 net scores, but give us the lowdown on this chart. Yeah, so this is something that, look, I think it's pretty obvious to the market you're seeing an uptick and spend across the board versus three months ago and a year ago and spend intensity. Among your desktop virtualization players, there's F5, right? So that's going to be kind of your VPN, right? And obviously they reported pretty good numbers there. So this is an obvious slide, but we wanted to kind of throw it in there, just say, look, you know, these organizations are seeing nice upticks and spend, you know, within the virtualization sector and specifically within Fortune 500. And again, that's kind of that, you know, work from home spend that we're seeing here. Right, so, I mean, this is really 100% net score in the Fortune 500 for workspaces is pretty amazing. And I think the shared end on this, the end was actually quite large. It wasn't like single digit, many dozens. I remember when workspaces first came out, it maybe wasn't ready for prime time, but you know, clearly there's momentum there and we're seeing this across the board. Sagar, thanks so much for coming in this week. Really appreciate it. We're going to be in touch with you, with ETR. We're going to continue to report on this, but Sagar, Sagar, stay safe and thanks again. Thanks again. I appreciate it and I'm looking forward to do another one. All right, and thank you everybody for watching this Cube Insights powered by ETR. This is Dave Vellante for Sagar Kedaki. Remember, all these episodes are available as podcasts. I publish weekly on wikibon.com and also on siliconangle.com. And don't forget to go to ETR.plus. Check out all the action there. Thanks for watching everybody. We'll see you next time.