 Live from San Francisco, it's theCUBE, covering Pure Accelerate 2017, brought to you by Pure Storage. Welcome to Pure 70 in San Francisco, everybody. I'm Dave Vellante with my co-host Stu Miniman, and this is Pure Accelerate 2017. Pure Storage in 2009 started a big wave of flash migrations, and the company's strategy was to specifically go after the large EMC install base of older symmetric mainframe class storage, and even to a certain extent, VNX and Clarion, if anybody remembers those terms, the install base. Pure's ascendancy was really a function of shifting from spinning disk to flash. Fast forward seven, eight, nine years later, and Pure is talking about big data and AI and machine learning and IoT, and is really trying to completely transform not only the storage industry, but itself as a leading player. The last time an independent storage company hit a billion dollars, about 20 years ago, a company called NetApp. Pure is trying to be the next to be a billion dollar company, Stu Miniman, a lot of action going on here. It used to be back in the day, I bought EMC for block, NetApp for file. Pure is trying to change that. Yeah, and Dave, storage, we've talked about it, when Dell bought EMC, what did that mean to the whole storage industry? I wrote an article when it happened and said, it's the end of the storage industry as we know it. When I came in here, it was like, oh, you know, we're going to be talking about storage, you know, you mentioned NetApp. I was at NetApp event last week and they said, storing is boring. It's really about, it's about the data, it's about the new applications. I really liked in the keynote, they were talking about new use cases, new applications, how do they fit into that multi-cloud world? You know, really interesting to hear, you know, Scott Deaton, who we've known since this company was in stealth, you know, laying out where the company is, they've got over 3,300 customers, a lot of SaaS applications, they're talking a lot about the machine learning and the AI pieces that are in here, but at the end of the day, I mean, Dave, this is their primary business, is a storage array, replaces, as you said, the traditional, you know, EMC boxes that used to be sold. So how much of this is still kind of an update on what the legacy is doing? How much are they ready for the future? And excited to dig in with some, you know, real customers here, you know, Pure has, you know, a good movement, good customer base, I've always had some, you know, good smart people with good tech, the Puritans as they call them, all wearing orange here, so, you know, cool venue and excited to dig in. Well, it's one of the fastest growing companies in the storage business and the IT business, and the way that Pure has gotten there, is it, you know, in its early days, it never really talked much about so-called software defined, it just did it. One of the problems that Pure attacks is the problem of migration. David Floyer and Wikibon have written extensively about the cost of migration, the pain of migration. It was almost just assumed, well, if I'm buying storage, I'm going to have to migrate, and I'm going to spend 50, 100, maybe sometimes many hundreds of thousands of dollars migrating my workloads from older arrays to newer arrays. Pure Storage has this evergreen concept where through the use of software and software defined technologies, it's able to upgrade new customers, you know, quote-unquote seamlessly, there's that overused word again, but it's able to deliver essentially storage as a service, even though you're putting an appliance on their site. So it's a radically different model. They've announced some things today, for instance, like three site data replication, which is very, very complicated, trying to simplify that. So a lot of really novel ideas, again, they come back to their ascendancy, it was really based to, upon attacking the slow, expensive spinning disk, using its data reduction technology to create parity between the cost of disk, spinning disk, and the cost of flash. Something that David Floria predicted back in 2009 would happen by 2014 for the high spin speed. Now with FlashBlade, which is essentially the file-based system that Pure has, they're going after that same sort of mantra with higher capacity spinning disk, really going after the NetApp base. Yeah, Dave, you mentioned that Pure could be the most recent billion-dollar storage company. The company that might actually beat them to that is Nutanix. Now of course, Nutanix sells more than just storage, they're hyper-converged infrastructure, which means they're the compute that they're also selling that's being used there. So it's not quite apples to apples, but the last quarter, Nutanix had about $10 million more in revenue than Pure did. They also had IPO'd and that hyper-converged trend, one of the things that I saw early on on that, Dave, was attacking that migration cost. Hyper-converged, like what Pure does, a software layer, you create a pool of architectures, I can add in nodes, I can change configurations, I can update without the traditional way that we used to do it in storage, which was, you know, buy that box, take months to get it in there, load it up, transfer it over, retest it, all of those things that really kept your time to value on storage down, and that's something that Pure, and all the hyper-converged players, have been attacking that kind of legacy mindset that we had in storage for so long. Yeah, and of course Pure's approach to converged is in partnership with Cisco and presumably others, I'm not actually sure about that, but Cisco's the main partner there with FlashStack, that's their converge player, they kind of do a knock on hyper-converged, kind of depositioning it as sort of low end, kind of contained within small remote offices, whereas their positioning FlashStack is the scalable internet infrastructure. Pure does very well with SaaS companies, they do, you know, they're increasingly doing better with Fortune 500, they've still got a long way to go there, about 80% of their business is US, so there's a lot of upside internationally. We're talking about a company that'll be a billion dollars in their fiscal 2018, which is fundamentally the year we're in now, they've got about a $2.4 billion market cap, they've grown at about 30% a year, and very interestingly, they have mid 60% gross margins at one point last year, they had like 69.6% gross margin, which is unheard of, you know, we haven't really seen this since back in the hay days of NetApp and EMC, the question is, is that sustainable? And of course the big question that we have today, and we're going to talk to Scott Dietzen, nicknamed Dietz, a lot of nicknames here at Pure Storage, about is the concept of a large independent storage company. That concept is going away, it's like extinct, except for one company really, NetApp, is the only billion dollar storage company left, it's been 20 plus years, maybe even 25 years since that's occurred, what are your thoughts on that Stu? You know, we wrote a piece maybe eight years ago, can EMC remain independent? Recognizing that most of EMC's value was coming from VMware, and of course the EMC could not remain independent. Do you think a company like Pure can unseat the leaders of Dell EMC, HPE, IBM, and remain an independent storage company? Well, one of the things I always look at is, what is kind of, where are they going to hit their plateau? They're reaching towards a billion dollars and they do continue to grow, I think Pure still has plenty of headroom, but how long does it take them, Dave, to get to, you know, three or five billion dollars? The reason I throw out that number is, that's probably how much storage Amazon's doing today. You know, look at Amazon's a 15 billion dollar company, somewhere between 15 and 30% of Amazon's business, and nobody in the storage industry talks about that because it just ties to my application. So I want to follow the applications, follow the data. It's good to hear that Pure is getting in with a lot of SaaS providers, from Wikibon data, two thirds of the public cloud data, I'm sorry, of the public cloud revenue, is SaaS providers. So, absolutely, hear companies like Pure, SolidFire, saw it before when they were an independent company, sold to lots of service fighters, as well as SaaS providers, Kaminario, a Massachusetts-based flash company, sells to, I believe it's about half of their business, is selling to the SaaS providers, because these are companies that look at, okay, I need to own how I scale my environment, own those economics, and need to grow that, and just one more piece on that economics, Dave, look at that kind of multi- or hybrid cloud world. I bristle a little bit when I hear Scott Dietz and kind of almost say, well, public cloud, it's in the corner, about 20% of the use cases fit in that environment. Yeah, we'll do snaps to Amazon, and we'll do some other things, but you don't put the public cloud in a corner and just say, oh, 20% of the market's there, because that's today. And it is still growing 50, 75, 100%, depending on which public cloud you're talking about. We think that there's still plenty of upside, and when does that become a headwind that will slow the growth of what Pure's doing? You see a lot of the other software, storage companies out there, saying how do they become software? When we were at the Veeam Show, Dave, how did they really were, we're going to live in Azure. We're going to partner with AWS, and they don't really care. Pure very much, their growth, their revenue, and their margins today are all built that they're going to be selling gear with that. Yes, they have the Purity One software, and they have some cloud plays, but it very much seems to be saying that public cloud's not the direction. I'm sure Scott will probably give us a little bit more nuance there, but that legacy change to new distributed architectures has been a tailwind for Pure, and when will cloud be something that will push against their growth? Well, we're going to ask Scott Deetson about that, and you're right on. I mean, public cloud clearly is growing. It's growing like crazy, particularly the SaaS component of that. Now, of course, that can be a tailwind for Pure, because they do sell to SaaS companies. They even, Scott even had a slide up there today, showing Google, Uber, Facebook, AWS. Did you infer, like I did, that they were implying that they were selling to those companies? No, no, no. I saw because in the last quarterly report, they talked about basically the number four through a thousand. Four through a thousand, right. So they're not selling to the top three that they're clear on. So okay, so the top three would be Amazon, Google, and Microsoft, but then there's Facebook and Uber. Possibly they could sell to those companies. A Spotify is a SaaS company. So that SaaS part of the market is growing like crazy. Now the other point is, Wikibon released a study. We've been talking about it for the last couple of weeks on theCUBE around the true private cloud market forecast. True private cloud is an on-prem infrastructure that substantially mimics the public cloud at a much lower cost. And we came up with this notion of true private cloud because there was so much cloud washing going on, which really was virtualization. Now the true private cloud is growing actually faster than any other cloud segment. Now from a smaller base, granted, but we see about a $230 billion TAM over the next 10 years evolving. Now the most important part of this, and Scott Deetson touched upon this in the morning as they had, used some nicknames again, that companies are really focused on lowering their IT labor costs. And we see $150 billion approximately of IT labor moving out of non-differentiated heavy lifting into what we sometimes call vendor R&D in the form of cloud or on-prem products, appliances, and other software frameworks that can automate and eliminate this low value provisioning and patching and lung management. So Stu, you were very much involved in that true private cloud report. That market's exploding. I mean, to me, it's all about TAM expansion for Pure. They're a billion-dollar company, roughly. They're participating in a 30 or 40 billion-dollar market, so they have a long way to go. Yeah, absolutely. Because really, Dave, it's about the application. It is not a winner-takes-all environment. When you look at multi-cloud, it's what applications, and even we start teasing apart pieces of my applications and where they live. So I look at that, there was a nice logo slide that Pure put up, and you say, okay, Hulu is a customer. Well, is Pure helping with their CDN? I really doubt it. You look at Workday. Workday, up on stage at Amazon ReInvent, talking about how they partnered with Amazon. So what applications is Pure winning? Which ones are their customers using the public cloud for? And how does all of that sort out? Absolutely, true private cloud is really that reinvention of the data center. That flipping, if you will, of, I mean Dave, you probably know better than me, that the saying that IT spends 80 or 90% of their budget on keeping the lights on. How do we flip that so that we can spend money on innovating, driving the business forward, stop spending on one of our favorite terms, undifferentiated heavy lifting, and move to innovate and drive the business, and have IT serving those applications and serving the things that help me differentiate from the competition and move faster. Because absolutely, I'm sure something we'll hear at this show, is it's that agility and that speed is what companies need. And Pure, with their six nines of availability and that if you buy it today, your future proof, if you will, is going to help customers say that they can have a platform that they buy today and know is going to serve them well in the future. Well, Mark Benioff, I think was the first that I heard said it. Or it might have been Peter Burris, I can't remember. But basically there are going to be many more SaaS companies coming out of non-tech companies than tech companies. That to me, Stu, is a big, big tailwind for a company like Pure, who's software first, software defined, knows how to sell to SaaS companies. The other thing is Pure is the latest company. They didn't say this, but they certainly, one could infer it. The latest company to basically say, tape is dead. So it used to be sort of offsite back up to tape. Now they're talking flash to flash to cloud as the long-term retention. So a lot of really interesting things going on here. The venue is actually quite amazing. It's at Pier 70, this place is going to get torn down right after the show. It's a place that used to be an old steel mill. They used to make battleships here, about two battleships a year during World War II. The new warrior's facility is going to be here in Dogpatch, Stu. And I know everybody's super excited about that. Yeah, well, yeah, a lot of purple hats here. A lot of excited warriors fans. All right, we'll be back. We've got day to day, all day, wall to wall coverage of Pure Accelerate, half hashtag Pure Accelerate. This is theCUBE. I'm Dave Vellante with Stu Miniman. We'll be right back with Scott Deetson right after this short break.