 Welcome to CUBE Conversations. I'm Stu Miniman and joining me from Wikibon World Headquarters in Marlboro, Massachusetts, is Wikibon co-founder Dave Vellante. Wikibon has been looking at the hyperscale players talking about the likes of Amazon, Google, Microsoft, Yahoo, who have been driving new technologies, started some of the big waves, like big data, adopted technologies like Flash before anyone else did and how they are impacting the way IT happens. This segment of CUBE Conversations we're going to be looking at, technologies that allow the cloud economics to be merged with enterprise functionality and joining us for this segment is SimpliVity CEO, Doran Kempel. Doran, thank you for joining us. Thank you, thank you for having me. So SimpliVity is your company, your newest venture, raising a lot of money, signing up a lot of customers, a lot of action going on. We've had you in the CUBE several times, so we want to get the update, but for those of you who don't know, SimpliVity brought us the HyperCube in what, 2012? Is that right? I'm sorry, the OmniCube in 2012, right? Which is a so-called hyper-converged infrastructure. The product went GA in April 7th, 2013. So I know it's confusing because we've become so large so quickly. Well you came out of Stealth in 2012, I should say, okay, then you shipped the next year. So give us the update, what's new with SimpliVity? So the company is growing very fast. Our customer base is growing very fast. Partners, we have over 250 partners. We've shipped hundreds of systems, we have hundreds of customers. If you look at the company, we had 100 employees in August last year, 200 in February, 300 already in August. So the company is growing very fast. We're very happy. And we feel that we're delivering on the promise of cloud economics, basically running at very low cost on x86 resources with enterprise capabilities. So basically if you're a CIO, you get the economics and there's no compromise to your enterprise capabilities. Okay, so we saw converged infrastructure come out right around the timeframe that you guys were starting the company. You obviously wanted to do something different. So talk about where we are in converged infrastructure. You know, so the early days were a little bit of this, a little bit of that, sort of bolted together. How has it evolved and what role do you guys play there? That's a great question. So when we think about hyperconvergence and the evolution of hyperconvergence, basically I see three phases. Phase number one, manifested by VCE, they've done a remarkable job, basically simplifying IT by taking a stack of infrastructure capabilities, integrating them into a container under one common management and delivering that to end users and basically the promise is faster deployment, easier manageability. This is phase number one and we think about it as integrated systems. Very valuable. Phase number two are companies that have taken just storage, primary storage, and assimilated that together with a server. So now out of the infrastructure stack that includes about 12 different products, what they take is the torso, the server, server virtualization, storage switch and storage. So they take the top of the stack out of 12 products, they take about four products and they do an excellent job assimilating that. We think about that as convergence 2.0 and it's a great step forward. This basically brings cloud or web economics into the enterprise. However, what convergence 2.0 does not include and that is the concern that CIOs have with regard to that particular phase of the evolution is you don't get the other enterprise capabilities and they fall into four categories. Category number one is protection. When I speak with CIOs, they say, yes, I want the x86 economics, but what about all the protection that today I get with three or four other products? Second is data efficiency. We have today in the enterprise anywhere from three to six different data deduplication compression optimization products for different phases of the data life cycle, for backup, for when, for the cloud, for SSD, sometimes for read cache. So that is the second capability. The third capability is performance. When I joined EMC 1998, 1998, we were shipping 18 gigabyte drives. Today customers ship six terabyte drives. So the density of the disk drives increased 300 fold. What about the RPM? Only 1.5x. So we have a huge discrepancy between the capacity of the HDD and the RPM. So how do customers and vendors react to that? They deploy a lot of SSD and deduplication of SSD. However, other than deploying SSD in order to address performance, what you need to do, which is something that we do, is we deduplicate and compress the data before it ever hits the disk, so we reduce the number of IOPS. So going back to enterprise capabilities, as I said, number one is protection. Number two is efficiency. Number three is performance. And number four, critically important in the enterprise is what we call global unified management. So back to your question about the phases of the evolution of convergence. Phase number one is what we call integrated systems. VCE is a great example there. Phase number two is only the torso of the infrastructure stack. Absent protection, performance, efficiency, and global unified management. And this is convergence 2.0. And what we see now, delivered by SimpliVity, is what we call convergence 3.0, and that's hyperconvergence, whereby on one hand, you get cloud, web economics, you run on x86, but on the other hand, you get all the enterprise capabilities. In fact, just to summarize that, 65% of our customers, 65%, run all of their IT applications across more than two sites exclusively on OmniCube. In other words, what we offer is not converge infrastructure for, say, VDI, or for some security application, or for a specific application, our customers run everything on OmniCube in their remote sites, as well as their main data centers. I'd say that over 60% of the applications that run on OmniCube today are databases. The rest are exchange servers, share points. We have banks running their ATM applications on OmniCube. We have cities that run their 911 applications on OmniCube. So basically, this is an infrastructure, core infrastructure play, convergence 3.0. A lot of diversity. I mean, Stu, we talk a lot about cloud economics and Amazon, of course, is growing like crazy. A lot of test and dev action going on, but you certainly see the demand within the enterprise for this type of diversity of workloads. Sure, and one thing I want to probe on here, when I look at how converge infrastructure has rolled out, one of the biggest challenges has been just IT, figuring out how to consume this. You talked about the earlier solutions, things like VDI and other project-based solutions. One of the main reasons that really happened from the practitioners we talked to is just their refresh cycles, their purchasing and their management were all siloed. Sometimes we call them cylinders of excellence, but it was getting the customer to change that profile is hard to do. And that's why it was easy to take something like VDI because VDI is a completely different environment from I go from a desktop to a centrally managed solution. So VDI was a great application to start with and then spider out into other applications. How have you made that jump? Or how are you seeing CIOs change that mindset? Are they changing their organization? How do they break from away from the old way and move to something that they can embrace like yours? Thank you for that question. Well, let me start by clarifying. We're not a VDI product. We're an IT infrastructure product. Yes, you can run your VDI on OmniCube systems and most of our customers do, but they run all of their infrastructure and inclusive within that is also VDI. So Stu, to your question, we did not start with VDI. We started with customers like banks, manufacturing companies, and they ran everything on those systems, including VDI. In fact, it's very important for us that people don't think that this is just VDI capability. We're not a VDI company. Having said that to your question, the way that we enter accounts is, and this is what we direct our marketing and field organization to do, is look for cases where customers are looking for storage refresh or backup refresh. And why is that? Because the budget that they have assigned just in order to renew their storage or backup is sufficient in order for us to tip the boat and basically replace the whole infrastructure with OmniCube. And this has been probably the most prevalent, I'm gonna call it, point of introduction. So we come in, we tell the customers that this is what we do. The first response that they have is, this is impossible. What you've just told us sounds great, but how can this be possible? And then we have them speak with other customers or do a POC, and on average within three months, referring to the 65% of the customers who are running totally on OmniCube across two or more sites. Within three months on average, they're running everything on OmniCube. Let's unpack that a little bit because I can see a skeptic saying, wait a minute, let me just make sure I get this right. You're saying for the cost of a refresh, you can bring in your hyperconverged stack, your modern stack, and essentially sweep the floor of the infrastructure and run everything on OmniCube. And you've got real examples of that. Can you share any with us? Absolutely. So basically, and this is remarkable, the TCO benefits to the customer is three X, which means that if you were to compare the OmniCube-based infrastructure that those customers deploy against what they would have to buy all those 12 products in order to get the same enterprise capabilities, the difference is three X in OPEX and CAPEX, which means that if you just look at an element of your infrastructure, your storage infrastructure or your data protection infrastructure, just at that budget, we can replace everything with OmniCube systems. And if you're in the commercial space, which is according to our definitions, the company is generating $250 million per year all the way to 2 billion. If you look at that commercial space, by the way, that is about 50% of IT consumption globally. I call it the fat middle. This is not, they're quite fit, but yes. Yeah, yeah, yeah. But this is a very large market. But it's a big market, yeah. In those particular cases, they can run all of their IT on anywhere from four to eight OmniCube systems, typically across two or three sites. And those customers get capabilities that they could not afford before that. Again, best of both worlds. On one hand, cloud economics, because you're running on x86. On the other hand, you get all the capabilities that only Fortune 500 companies can afford today. Dorn, you just gave me a sort of another thought here. Can I optimize, my question is, how, when you put it in OmniCube, how does it compare to a traditional environment where I might have bespoke infrastructure, specifically in terms of the number of cores that I need? If you're so efficient, I should be able to reduce the number of cores. Why is that important? Because companies like Oracle license based on the number of cores, and maybe half, maybe 60% of my license, or my TCO, is license and maintenance cost from, let's say, an Oracle shop. Can you help me reduce my cores? In other words, if I spent more on the infrastructure, and maybe didn't take it all on TCO savings, can I reduce the number of cores? So the answer is absolutely. But let's expand the question. When we talk about the cores, where are the cores? The cores are in your server. The cores are in your switch. The cores are in your primary storage array. The cores are in your SSD array. The cores are in your data deduplication for backup, in your WAN optimization, your cloud gateway, and so forth. Cores are across each and every one of the 12 different products. Do we reduce the cores? Of course we reduce the cores. So we reduce a lot of that gear because you become much more efficient. Now let's go to the top, to the cores that run on your servers that I think you probably were focusing on. Those are the ones that they're going to license me on. One of the things that we do uniquely, so it took us three and a half years to develop the core technology that was released in April last year, which was release 1.0. Three and a half years. That's about 2X more than your standard IT infrastructure company. And one of the things that we've done is in solving the data problem, we've developed an accelerator card. This is basically a PCIe card with an FPGA with NV RAM that allows us to reduce latency significantly in comparison to normal storage products. You probably know that we won gold at VMworld for best storage and backup technology for virtualized environments. Again, you get no compromise with this technology. You get better capabilities than the standard stack. But this card is an offload engine that allows us to deduplicate, compress, and optimize the data in real time before it ever hits the disk. And it reduces latency and it increases performance because you write less data. There's less IOPS. IOPS is one of the most expensive resources in the enterprise. So if you now use this card, what does it save you? It saves you all the Intel processors. I hope Intel doesn't get upset. We love Intel, of course. But it saves you all the Intel processors that you otherwise would need to load into infrastructure in order to do all that work because eventually you're gonna dedupe the backup, you're gonna dedupe the when, you're gonna dedupe the traffic to the cloud, you're gonna dedupe the data that goes into SSD, et cetera. So we reduce everything, but one of the major savings has to do with the simplification for the user. What we see is one person managing a global infrastructure from a single pane of glass, P-A-N-E, which reduces a lot of P-A-I-N. So one person now manages global infrastructure and the rest of the team members can do other things. I want to turn the question back to sort of economics and the practicalities of the cloud. So a lot of the CIOs in the Wikibon community tell us they're under extreme pressure from the corner office to move to the cloud. Amazon's growing like crazy. Some people estimate they'll do $5 billion this year, even though last quarter some of their business may be attenuated a little bit. But nonetheless, a lot of pressure to move to the cloud, just outsourced the whole lot, right? So CIOs obviously don't want to do that. So a couple of questions. Can you point to maybe some examples where people have said, okay, I can replicate cloud economics, certainly, maybe even agility and simplicity and I can provide sets of services internally on-premise to my organization that will sort of call off the corner office dogs. Maybe you could talk about that a little bit. That's a great question. So what we've seen, there are actually two elements. One is the CIOs that I speak with in small, medium and large companies globally. What I hear from them is that they're under a lot of pressure sometimes from their management. CFO, CEO, why can't we run the way that presumably the Googles, the Amazons, the Facebooks run, just on x86? And the answer of those CIOs to their management is we don't run our operations the way that the web or cloud companies run their operations. You can't just bring me storage that runs on servers and that would be I need all the rest of the capabilities, performance, protection, efficiency, manageability. Without that, I can get my job done. What SimpliVity does is two things that are very important in that context. One is we've released an ability for you, Mr. Customer or Ms. Customer, to run your infrastructure locally on Omicube Systems that's giving you cloud economics in-house. And we allow you to now push data to Amazon. The first release is EC2. So basically you can back up and restore data to Amazon. So basically you can move data very efficiently back and forth from the cloud. The cloud becomes another virtual environment for you. You don't need to buy any third-party product. This is another capability that is managed by the same person in the prior example. One person manages the global environment, that's one. Two, and this is very interesting, we have customers coming back to us and telling us, you know, with the Omicube infrastructure, a lot of the workloads that I thought that I may send to the clouds, I'm actually gonna keep in-house because there is a cost to me of moving data and workload to the cloud. You simply are making the cut-off point a little higher. In other words, less workload is going to the cloud. It stays on-house because you're helping us with the economics and very importantly, I don't need to make any compromise. I get the economics and I get the capabilities. So maybe I'll move my long-term retention into the cloud, maybe as maybe glacier or something like that. Yes, archive, long-term retention. Sometimes you have maintenance cycles, so you wanna move some data to the cloud, bring it back, et cetera. Okay, I wonder if we can just talk about what's going on in the marketplace. You guys have raised, I think north of 100 million now, right? Is that right? I wonder if we could get your thoughts on... By the way, a lot of people boast how much money they raise. I also wanna run a very efficient company. So this is not a race in terms of who's raising more money from investors. You need to be efficient, you need to deliver capabilities to the market and you need to take care of your team members. Well, I know that, and I'm sure your VCs love that message, but I know we've had David Scott on the queue before and he has told us that he had to raise so much money for three-par back then. I think it was maybe 80 million. Now, companies today are raising much, much more. And I think actually, SimpliVity, 100 million give or take is not an enormous amount these days. When you compare it to, for instance, what Cloudera did recently with, I don't know if you saw that deal with Intel investing 700 million there, a software company. Software's supposed to be capital efficient. So my question is, and you've sort of partially answered it, is it enough to compete in today's environment against the whales? How do you compete against those guys? I say you touched upon a little bit, but I wonder if you could add some color to that. So that's a great question. So I think that the amount of capital that we raise is the amount of capital that allows us to run at the execution curve. So think about, there's the opportunity curve, which is basically a realization of how many customers are willing to buy, deploy, run on your products in a given year. So we are very lucky to operate in the market that has tremendous appetite for this technology. So the opportunity curve is very steep. Then the next question is, what's the execution curve? How many people can you hire in a given year, say salespeople, support people, engineers, and deliver to the customers the type of experience that they deserve? And then the question is, what's the financial curve that you need in order to support the execution curve? Now, there's a limit to how much we can grow without impacting quality, the quality of experience that the customers get. And what I would say right now is that we have as much capital as we need in order to execute with excellence. Now, very importantly to your question, how can you compete? So we don't have thousands of salespeople. However, we are 100% committed to the channel, which by the way means that you're not gonna see us striking deals with vendors that the channels don't like. This is very dangerous. So we are very carefully building an ecosystem of partners. We already have more than 250 partners. I'm referring to value-added resellers, system integrators. And those are the best that we can find that are very much aligned with our strategy. And with through those partners, when we address any customer in the world, she or he should know that they're getting excellent support, excellent quality, et cetera. Can we do it today at the scale of some of the very large companies? No, we cannot. But on a per customer basis, what you're gonna get is a better experience because you're getting better technology. You're getting 24 by seven by 365 support. You get great fixed services within four hours globally. So on a per market or per customer basis, we can compete. And we've been very successful competing. So Dorn, you're not trying to be Uber or Airbnb. You're saying that the quality and the customer experience and the channel partner relationships trump scale for the sake of scale. I would say that scale is very important. So we want to scale as quickly as possible. But if you're a customer and you're asking yourself, should I work with SimpliVity or should I work with a public company that is doing $100 billion in revenue? Then what I would say to you is that you as a customer, if we're doing business with you, you're gonna get better technology and you're gonna get better care and you're gonna get my phone number. In other words, I know of all customers and if there's ever an issue, any type of issue, I know about that. So we can't deliver to 100,000 customers tomorrow, but if you're among the hundreds of customers that we already have, you're gonna get excellent care. I was wondering, speaking to the channel, if you can talk about what you're seeing in the channel, how their education level is today and how you're working with them specifically. When I look at Converged Infrastructure, when it rolled out, it was often the customers that were moving from, say, a networking or a storage practice into a whole data center practice that were really successful with the Flex Pods and Vblocks of the world. And today, when I talk to the channel, there's not a lot of them that are really sophisticated when it comes to cloud. So since you interact with AWS as a backup and you're bringing a whole stack together, what do you look for in a channel partner and how are you helping to educate them for this new world? So that's a great question. We're looking for partners who are enabled, focused, and loyal. And this is what we wanna give back to them. The good news is that technology is so simple that we have partners who've come from the security industry. We have a great partner in Germany. I'm gonna name them, they're named Indevis. They've never sold IT infrastructure. They have about a thousand security customers in the German speaking part of Europe. And then they deployed OmniCube systems for their own infrastructure and they got hooked. They said, this is simple. We can sell this to our customers. And they did about 10 deals just in the three quarters that we've been selling in 2013. So this is very interesting because this VAR has become an expert on all these technologies because you don't need five or 10 or 12 different experts. One expert understands VMware, understands the needs of the customers, can sell these systems. So we have partners that are mid-sized and we have some billion dollar partners, very large system integrators, very large global partners who do today for six billion dollars in sales. And very important, these are infrastructure partners. They don't sell just VDI or application, ABC. They basically deploy infrastructure across very large segments of the market. Doran, how should we be thinking about the competitive landscape? I wonder if you could sort of categorize it for us and specifically, how does SimpliVity differentiate? So basically, let me go back to things that I've said earlier. The way that we think about the landscape is in terms of convergence 1.0, 2.0, 3.0. 1.0 is basically an integrated system. You take a lot of legacy products, you put them in one container with common management, you simplify management, you don't really reduce the TCO because you're running the same products. However, you get enterprise capabilities. This is 1.0. It's very easy for customers to identify these players that we have a lot of respect for. Convergence 2.0 becomes more efficient only in the layer of the server and storage. They're very similar to what you see on the cloud. And this is very efficient for your VDI environment for maybe tier two, tier three applications where you don't need the capabilities of convergence 3.0. And what are those enterprise capabilities that you really need in order to run your enterprise? Protection, efficiency, performance, global unified management. This is 3.0. And our recommendation to customers, as well as analysts, as well as partners is evaluate all the converged products against those metrics. Ask to yourself, are they delivering cloud economics? In other words, they run on x86 with the enterprise capabilities. When you evaluate convergence 1.0, the VCEs of the world against those metrics, you'll say, I get enterprise capabilities. I don't really get the economics that I want. If you look at 2.0, you're getting very efficient storage and servers. It's going to be enough for some of your applications, but it does not offer the enterprise capabilities. The best of both worlds, 3.0, or whatever you want to call it. I'm just trying to frame the market is IT that runs on x86. You get the cloud economics, but you get all the capabilities. But how to deliver that from a technological standpoint is a different story. But this is how we suggest that the players be evaluated. Okay, now are you asserting that you stand alone in 3.0? Are you seeing others move into that market? Do you think the 1.0s can get to the 3.0? I wonder if you could address that a little bit. Okay, so I'd rather talk about SimpliVity because I'm not an expert on other people's technologies, but I'll say the following. First of all, getting to 3.0 is possible. And I think that this is going to be the IT infrastructure prototype of the world. Excuse me, the blueprint of the future. In other words, I think that you can combine the best of both worlds. Three, four, five years from now, when we look back, we'll see that a significant percentage of the enterprise runs on x86 without compromising capabilities. So I'm confident that this is possible. I'm confident because this is what we've delivered and 65% of our customers run all of their IT across two or more sites on these OmniCubes. With regard to other players, I'm sure that it's possible because if we've done it, other people will do it. However, as you know, I was also CEO and founder of a company named Diligent Technologies, which IBM bought in 2008. I think we have a much greater opportunity here and SimpliVity has much greater aspirations than to be acquired tomorrow. And you probably heard about the rumors that HP is acquiring SimpliVity for $2 billion. That is not true. We're not in dialogue or nor have we been in dialogue with anybody about selling the company. We're having a lot of fun. But having said that, I'm sure that it's possible. However, in order to accomplish that, you need that to be your vision from day one, architecturally. And we believe that the way to do it is to solve the data problem. The data architecture that most enterprises deployed today was not developed in order to address a virtualized, mobile, cloud-enable world. That's why you need all these appliances for protection, for efficiency, for performance. Ask yourself, why are there 12 products in the enterprise? Something is wrong. And by the way, eight of them are just associated with protection, performance, and efficiency. So the way to address this problem requires an architecture that is centered around this promise of best of both worlds and x86 with all the capabilities. I'm sure that others will do it. I'm not familiar with anyone who's doing it today. Well, you talked about the market size. I would agree, it's hard not to agree that the TAM on your current market is several hundred billion. We pegged it probably at around 400 billion, whereas the TAM for a company like Diligent was probably three, four billion, maybe the size of the TAM market and then some. So we're talking about a different ball game here. So I'm wondering, if we look at the VMware ecosystem, VMware's built a huge ecosystem. They used to always brag that for every dollar that VMware sold, it was 15, 20, or more dollars that got sold to the ecosystem. I don't hear that line anymore. You don't hear that line anymore. And one of the challenges is, number one is, in some ways, VMware's eating its ecosystem. They've got things like some data protection products built in. There's rumors of things like Marvin. They've got their VSAN, obviously. And VMware's under a lot of attack. Hyper-V's been growing quite well. Service fighters are using the KVM versions. Can you, where do you sit in the VMware ecosystem? And I know it's been on the roadmap to do other hypervisors. Can you give us the update there? Let me start by saying that VMware is probably our most important partner. We live in the VMware ecosystem, and when we speak with customers, our focus is to show them how we make that infrastructure better. So very important partner of ours. We work with our sales people, our platinum sponsor in their shows. We're going to be a platinum sponsor again at VMworld in San Francisco. I think we're already in August, so it's up and coming. And by the way, at VMworld, we're going to make some announcements that underscore this message of best of both worlds. Cloud economics, x86 based with enterprise capabilities. So we have a great time working with VMware. And I can't think of anything that worries me in that regard. Do they add more capabilities to their stack? So no comment on kind of Microsoft support in the future. Oh, so as you know, our technology is open to other hypervisors, and we're working on Microsoft and KVM capabilities. However, I think that 80 or 90% of the world is running VMware. This is a huge market. We stay attuned to customers. We deliver what they want. Doron, we're out of time. Last question. What should we be paying attention to? What are the sort of indicators of progress or milestones that observers like us should be watching over the next, say, six to 18 months with regard to simplicity? Well, we're going to stay dedicated to our customers first and foremost and to our partners. And we're not going to take any steps away from that. And our promise, our vision is to simplify it by delivering the best of both worlds. Cloud Economics x86 with enterprise capabilities. So every step that we make is going to be aligned with that message. And we're very happy with the progress of the companies making. We need to stay focused, aggressive, but humble. Doron Keppel, thanks very much for coming inside theCUBE. It's always great to have you and we'll see you at VMworld. Thank you very much. All right, thanks for watching everybody. Thanks to Stu and this is CUBE Conversations, Dave Vellante, Stu Miniman from Wikibon headquarters. We'll see you next time.