 from Austin, Texas. Extracting the signal from the noise. It's theCUBE, covering Dell World 2015. Brought to you by Dell. Now your host, John Furrier. Here at SiliconANGLE, this is our flagship program at theCUBE. We go out to the events and extract the signal and noise. With here is Mark Lewis, former CTO of EMC. Now the CEO of Formation Data Systems, a hot startup, funded by Dell Ventures. Coincidentally, all this stuff's kind of coming together and you have no knowledge of whatsoever what happened. No, no, it was a surprise to me, but you can clearly see why it would happen in the market today, John. You know, there's incredible amount of, I think, need for consolidation in certain industries and certain things and getting scale and whatnot. Dell clearly wanted to be a bigger enterprise player and I think it's the big move for him and I think it's really cool. And you also have experience, we're at Silver Lake, we're working with KKR with Marius Hobson going to be on at one o'clock. You also were the CTO at EMC, so you know the wall of road map, you know the inner workings, you also ran and booted up EMC Ventures in California, which was a huge success with Props2U. Always like to highlight that great, great job you've done there. So you've seen a lot of the inner workings from a company standpoint at EMC, the technology, the products out in the market as a VC, you've looked at all the investments, you've looked at Nasira, Big Switch, all that stuff. What is their take here? Because there's a lot of products being jammed into one. EMC had product overlap to begin with. Now Dell has product overlap, technology's shifting as Michael Dell's pointing out. What's your take on this? Yeah, it's a lot of moving parts. So they're going to have a lot to get their arms around in all the moving parts. You have software, you have security, you have Nasira, new things, older things. If I break it down to kind of the one big thing that I took away was Dell really wanted to have be a force in the enterprise and wanted to have that diversity. And I think there's going to be great things and good things and things that'll have to get shook out. But what the one really thing does, it's very hard to build an enterprise business from scratch. And I think that's a transformational move to get them there. And yeah, I think there's a lot of things that are going to have to work out. And the one other thing I would say, though, is that when you look at companies like ours and companies that are trying to do next generation stuff, the Dell EMC gets them a bigger company in more breadth and clearly gets Dell more enterprise focus. It does not get them the revolutionary technology, say, to go up against Amazon or go against the next generation of technology. That still becomes a need that they have to have to move forward. So I saw Brian Gallagher two weeks ago, and I had a cocktail with him kind of late in the night. And I said, because he's not doing all the dev ops about EMC. Brian Gallagher at AWS. Now come on, that's... You're swimming upstream, what do you feel like? A salmon trying to get home. I mean, it's a hard, that was a hard nut to crack for EMC to get into that dev ops game. And with Amazon crushing it, he and I were just having that casual conversation. I mean, it's a lot of work to your point. Here with one move, Dell gets an amazing set of management capabilities. H.R. and H.R. people. So it's kind of like a salary cap problem, right? I mean, you've got Jeremy Burton, you've got Pat Gelsinger, Joe Tucci's kind of going away. You've got Goulden, Howard Elias, Gallagher. I mean, the list goes on and on. I mean, you know the management team. It's all a lot of senior people there. I mean, some companies would love to have just two or three of those guys. So is that a problem? They, well, they clearly got a great team. They have to figure out how to organize that team. The thing that I've always, I've done a lot of startup technologies and whatnot. And one thing I learned early on was that go-to-market is a lot harder than people think. You know, technology in some ways can be very easy to build. And go-to-market is tough when you have, if you're a network company and you try to sell storage or if you're, you know, computing companies for a long time have had trouble selling storage again. So Cisco's doing a good job. They're storage, oh yeah. Well, I mean, Jim McHugh, UCS, no one thought they'd do anything in the server. UCS did well, but so far, Cisco's foray into storage has been what I would consider to be less than stellar. Well, it's on the storage front. Yeah, server is tough. And my point is that it's tough. They did a good job with UCS. They made it and they built it ground up. Tough job. So that's why I think the secret to this acquisition is really the go-to-market capabilities of EMC. Well, that's some of the pre-existing market. VCE, for instance. I mean, does that like, who's going to buy V-Block? You know, I guess I have a unique opinion there. VCE is kind of an artificial solution. It was, okay, you know, you always wonder how much new customers it really attracted. There was, there obviously was an affinity there, group there that bought. It's hard to say how much of that revenue would not exist, you know, if you just had the three companies. So I got to ask you the question straight up. Is this the end of the federation as we know it? Dismantling as we speak, or is it going to be a... Well, I guess, I guess merely because of the fact of this amount of change, it's the end of the federation as we know it, but there could be the federation too. There could be a number of things. I saw Virtue Stream got spun out. Hey, Star Wars is our new director, you know, J.J. Ambram. It could be federation, the next generation, what is federation, the sequel. We got all sorts of things that could be, I guess. So classic federation. Let's talk about the glue. Glue is a critical part for these deals. Glue and technology standpoint. You need middleware, you need database, a lot of these things. Storage needs to be operationalized to be more internet of things friendly. A lot of stuff you're doing. What is the glue to hold all this together, or is it simply the play as, hey, we're one big portfolio of Lego blocks, Mr. Customer, you put it together. Well, I think you have to, I assume Michael will take this in a couple of phases. The first is, yeah. How do we put the pieces together and come up with a kind of a rational set of building blocks and a rational set of components? And that becomes phase one. Just give me a complete solution or give me the pieces. And then more and more it has to be, how do I integrate that solution? How do I have a more competitive together than not, right? Clearly, I think for these existing environments, classic legacy client server computing, it's going to get more and more about complete solutions as that market actually starts to wane a bit. Talk about Dell Ventures, because Jim Lucia I've known from Northwest, great guy, now he's heading up to Dell Ventures. You were one of the first investment, not one of the first investment. Early. They did an early investment in your company and also did the B round. What's it like working with Dell Ventures and Jim Lucia and Team? I have to say, because I will even mock my own self a little bit here. We had nothing at EMC Ventures that competed with what I saw with Dell Ventures in the sense of support and access to customers. We have formation as its first booth here at Dell World. Courtesy of Dell Ventures. They built the solutions showcase, offered us a space, and when you're a poor struggling startup, that's a big deal. I love the line of the keynote, big borrow and steal. You guys are running a billion dollars, a billion uniques, they still beg, borrow, and steal. You're in that phase, you're in startup formation data systems, you're beg, borrow, and steal, but you're on your B round. You're rich compared to us in terms of cash flow, money in the bank, well-funded. No, but seriously, you are at that stage now where you have to start beg, borrowing, and stealing, if you will, because now you have to deal with the noise of the EMC acquisition, so where does formation fit in this? Is there a strategic deal in there in the works? Are you independent of Dell? I have no idea of that, but I got to tell you, the Dell EMC deal, personally speaking, the Dell EMC deal is the best thing that ever happened to formation. Best thing ever. Why? Because it's signaled to the entire world that a change was coming, and so it sent this big message to me that if EMC was growing 20 to 30%, storage was still on fire in the legacy environments, not declining year-over-year, quarter-over-quarter, that this deal never would have happened. There never would have been act as investors. It never would have happened. It happened because the market is maturing, and the legacy market's going away. I got to ask, so that's a great point. I want to go to another point. So you know theCUBE, we'd love to talk to people and get the insight and share with the audience. And one of the things we did early on was we saw the big data movement, we saw the DevOps movement, and that became now history in the cloud, but the DevOps movement showed that the developers are in charge. The developers are driving the bus. They're dictating agile, continuous innovation. Now what you're talking about with the shifts in the markets on the enterprise side, the customer's in charge. So for the first time, the signaling to a shift where the customer, so the insight in theCUBE this week and last week, certainly at Grace Hopper and other places, is that the vendors aren't in charge anymore. The customers are, meaning I want agile solution deployment. I got to provide solutions. So are the customers in charge? And John, the reason they're so insistent about these needs is it's not the vendor in charge, it's not the customer in charge, it's their users are in charge. And so the head of IT or the VP of Operations is not going to get another chance to support their customers if they don't build modern systems inside because the shadow IT will build, they will go to AWS. So you see this market as a one shift moment. If you're tacking, you got to make that ready about, turn that boat. If you're a VP of IT right now, you have to stop dictating what your users use and start asking. You have to make them real customers because they have an alternative and that's going to get harder and harder. As DevOps forms inside of large enterprise, the DevOps guys have a choice. They will go to AWS if they can't get it solved inside. Our argument with formation is you can build the storage systems that AWS has on premise, you can stay in control. That's what we think of the world. And that rings true with Michael Dell was saying about the world could be a better place is ultimately that's going to be the less contentious and more kind of mellow, chill environment for the user if they're happy. Yeah, but it's about here, if you remember the old BYOD, bring your own device era. After a while, once the CEO started carrying an iPhone saying the blackberries were mandatory, no longer became an option. And that whole model of control changed from IT to users. Users in the company. And that's happening now with enterprise IT. DevOps is moving into those big companies and IT either needs to support DevOps or DevOps will go outside. Okay, so I got to ask you the forward looking question. As someone who's been through a lot of cycles of innovation, inflection points, up and down cycles, you and I both lived through some cycles, good and bad. We are in a good cycle right now. Obviously, the bubble conversation is more on the consumer side. There is some rationalization going on within the public markets and private markets. I heard Michael Dell talking about it. But putting that aside, what is the future look like? What are you excited about? I mean, you see this as a once in a lifetime situation. You might mean. Well, I'm so excited about what we call the last time it was on theCUBE, we call it kind of the second game of the double header. I am so excited that Amazon and Google and many of these companies have seeded this new era of computing. And that doesn't happen very often. It's a 30 year change, right? And what I'm really excited about is the first kind of game was played with the cloud natives and all the new people adopting, but you have this huge mass market that is in legacy right now that's going to have to move over the next five years. And it's going to be incredible change and people aren't going to- With a lot of disruption. Ton of disruption. And if I can mention one, my only peeve in storage right now is, we saw this great wired article about walking dead and how all the legacy vendors- Yeah, it was a horrible article. And that was the front part of it. It was hyperbolic, but accurate. But the back part of it drove me crazy because they said that Flash was somehow disruptive. That's what drives me crazy in storage. Flash make this clear. Flash is not disruptive. These little technologies are not disruptive. What is disruptive is the movement to software-defined technologies and the move to this third generation cloud, DevOps-based technologies. It has nothing to do with these lower level things. And that's causing a huge confusion in the storage. All right, so that's a good point. These point releases are these incremental technologies. All-Gran and Flash is pretty damn incremental. So that being said- It's a big deal. But everybody's got it. Yeah, yeah, okay. You see he's got it. I'm with you in the, I'm not going to argue. Disruption there. I agree with you. But let's talk about internet of things. Well, part of the reason why it's not disruptive is because the guys, the new entrants, can't achieve escape velocity because everybody's got it. Right, and it's maybe one company's 10% better than another. Who leaves EMC for 10%? You've got to be 10X better. Dave, welcome to the set. Dave, just came back from lunch. I say Dave. I'm sorry, who was there? I helped jump it in. Good to see you, man. Good to see you, man. Dave, Dave, first of all, you know, you got to ask for permission to talk. I'm not only kidding. Now back to my point, I was trying to get us internet of things. How big is that? Because Michael Dell's leading with that on his keynote and we are seeing massive disruption with IoT. I think it's absolutely huge and enormous and it's going to create this other wave. It just like storage has created waves of big data, but economics drive that wave, right? The internet of things will happen when the economics of IT let it happen. And that's why we want to make storage less expensive so people store more stuff. And that's the way it works. It's an economic based system. But is IoT disruptive in the sense that it's going to create, get a kill old players and create huge new businesses? Or is it the guy who owns the parking meter is going to benefit from IoT? So I don't see IoT as disruptive. I see IoT as a huge wave, bigger than any other wave perhaps we've ever seen. But I'm not sure it's disruptive. Well, they like everything else. I think that it will benefit people. People will have new advantages. Well, it can be see disruptive. They'll take advantage of it. Hugely disruptive. You can argue they were building on mini computers and networks. I think there'll be some losers. I think client server computing is going to be the loser in all of this. When you move to DevOps and agile computing, you need cloud and as a service delivery. Real cloud. I mean, it can be private cloud. Real cloud. It has to be real private cloud. Real cloud. Yes, we're talking real cloud. Do you tell us what real cloud looks like? Yeah, absolutely. Real cloud is real simple. It is not VMware. It is not client server computing. It is not the same old thing with a marketing label on it. It is as a service on demand, instantly available API driven computing. It is the things you have with AWS. It is the fact that if I want storage, I can get it. I get it immediately user driven. All of that should be dynamic. Everything. The only thing, it doesn't have to be public though. That's what we're trying to do. So is this a good time to be a CIO right now or a bad time? Well, it's a changing time. In all disruptions, you're going to have winners and losers. The winner CIOs will be the ones that figure out ways to embrace the disruption, start up new data centers, do things that prepare themselves. And the CIOs that lose will be the guys that stick their head in the sand, like always, right? And say, oh no, no. I love my sand. I love my sand. So I got to get your take on just the economics, because you're a Silver Lake kind of guy. You know the players over there. Numbers. I mean, I think they make sense, cost of a capital is really low right now in the private equity market. They're a private company, cost of capital is good. I mean, the management team is super strong at Dell. They could probably make a good run at this. What's your gut feeling on the numbers, the debt, all that bullshit conversation? You know, as you say, it's very smart individuals. And I'm very confident that if Michael and Egon and those guys have gone through this, this makes sense. You know, they're not going to do something that doesn't annihilate a great deal of respect. Plus the E&C has a good track of your ad managing corporate governance. Yeah, David Gould and financial rock star. So they have some of the best minds there. And that's why I always say the duality of this is, I think it's great for customers. I think it's going to be good economically for a lot of things. There's obviously going to be impact in consolidation and overlap, but good overall. But the one point I try to make is, is you just don't take these two big existing vendors and create innovation out of nowhere. Mark, thanks for doing a drop by a fly by on the lunch segment here. Great to see you guys. This is our cube lunch cast. Just to walk on from the floor. Former CTO of EMC, now the CEO of Formation Data Systems, Mark Lewis, formerly a managing director, ran EMC Ventures, which actually was instrumental in the NACERA deal among others. Congratulations and welcome, welcome to Austin. This is Dell World Live Coverage. I'm going to keep you right back at this short break.