 From around the globe, it's theCUBE, presenting Cube on Cloud, brought to you by SiliconANGLE. Hello, everyone, and welcome back to theCUBE on Cloud, where we're talking to CEOs, CIOs, chief technology officers and investors on the future of cloud. And with me is Dave Humphrey, who's the managing director and co-head of Private Equity North America at Bain Capital. Dave, welcome to theCUBE, first time, I think. First time, yeah, Dave, thanks very much for having me. So let's get right into it. As an investor, how are you thinking about the evolution of cloud? When you look back at the last decade, it's not going to be the same in this coming decade. It's ironic, 2020 has thrown us into the accelerated digital transformation in cloud. But how do you look at the evolution of cloud from an investment perspective? What's your thesis? That's a great question, Dave. For us, we're focused on investing in technology and really across the economy. And I'd say the cloud is the overarching trend and dynamic in the technology markets and really for two reasons. One is a major shift, of course, that's going on. But the second and frankly, even more interesting one to us is all the growth that the cloud is creating in the technology markets. You know, the shift I think has been well-covered, but five years ago, 2015 by our analysis, two thirds of all computing workloads were done on premises. And only five years later, that's flipped. So two thirds of all computing workloads now done in the cloud. And of course that shift is a lot of ramifications as an investor. But even more interesting to us is the growth in technology and the usage of technology that the cloud is creating. So over that same period of time, the total number of computing workloads run has increased by 2.6 times in just a five-year period of time, which is really a dramatic thing. And it makes sense when you think about all the new software applications that can be created, all the data that can be used by new users and new segments and the real-time insight that can be gleaned from that. And it's that growth that really we're focused on investing behind as investors in technology. You know, it's interesting, you shared those numbers. And you hear a lot of numbers. I actually think you're even being conservative. Ginny Rometti used to talk about 80% of workloads are still on-prem. Andy Jassy at Reinvent said that 96% of the spending is still on-premises. So that was kind of an interesting stat. And I guess the other thing that I would note is it's not just a share shift, it is. It's not just the cloud eating away at on-prem. We've clearly seen that. But there's also incremental opportunity as well. If you look at Snowflake, for example, adding value on top of across multiple clouds and creating new markets. So there's that double, that one-two punch of stealing share from on-prem, but also incremental growth, which is probably accelerated as a result of this compressed digital transformation. So when you look at the big three cloud players, I mean, roughly speaking, they probably account for $80 billion in total revenue, which I guess is a small portion of the overall IT market. So it has a long way to go, but what's the best way to get good returns from an investment standpoint without getting clobbered by their tendency to sometimes co-opt some of the best ideas and put them on their primary services? Yeah, absolutely. Well, for us, it really comes back to the same fundamental principles we look for in any investment, which is finding a business that solves a really important problem for its customers and does so in a way that's really advantaged versus competition and can do something that other competitors just can't do, whether those be the hyperscalers that you're describing or other specialized and focused competitors, and then finding a way that we can partner with those companies to help them to accelerate their growth. So surely the growth of the likes of AWS and Microsoft and Google as you were describing has been a profound competitive shift along with the cloud shift that we've all talked about. And those companies, of course, can offer and do things that past purveyors of computing couldn't. But fundamentally they're selling an infrastructure layer and there is room for all sorts of new competitors and new applications that can do something better than anybody else can. So any company that we're looking at, we're asking ourselves the question, why are they the best ones to do what they're doing? How can they solve the most problem for their customers and do that in a way that's resilient and we see lots of those opportunities. And I want to pick your brain about the Nutanix investment, but before we get there, I wonder if you could just talk about Bain Capital and their history of investment in both cloud and infrastructure software and how do those investments, how have they performed and how do they inform your current thesis? Yeah, absolutely. So Bain Capital was started in mid-80s, 1984, actually as a spin out of Bain and Company Consulting. And the basic premise was that if we're good at advising and supporting businesses, we should partner with them and invest behind them and if they do well, we'll do well. And as I said, focusing on these businesses but do something really valuable for their customers in a real advantaged way with some discontinuous growth opportunity. That's led us to grow a lot. We started out actually in the venture business and grew into the private equity business, but now we invest across all life stages of companies and all over the world. So we're $105 billion in assets that we manage across 10 lines of business and we're truly global. So I think we have about 470 investment professionals and 210 of those at this point are located outside the US. One of the really interesting things for us in investing in technology broadly and in infrastructure in the cloud more specifically is that we're able to do that all over the world and we're able to do that across all the different life stages of a company. So we have a thriving venture capital business that really we've been in since the origins of being capital has invested across countless cloud and security and infrastructure businesses taken successful companies public like solar winds sold companies to strategists and grown businesses in really thriving ways. We have a growth, mid-market growth technology business that we launched last year called our technology opportunities fund. They've made a really interesting cloud-based investment in a company called the cloud gurus, cloud guru, excuse me, that trains the next generation of IT professionals to be successful in the cloud. And then of course in our private equity business where I spend my time, we are highly focused on technology sector and the impacts of the cloud in that sector broadly. We've invested in many infrastructure businesses, scale businesses like BMC software and rocket software security businesses like blue code systems and Symantec. And of course for those big businesses, they've got both on-premises solutions. They've got cloud solutions and often more focused on helping them continue to grow and innovate and take their solutions to the cloud. And then this taken us to our most recent investment in Nutanix that we're very excited about it. We think it's truly a growth business in a large market that has an opportunity to capitalize in these trends we're talking about. I wonder if you could comment on some of the changes that have occurred. You guys have been in the private equity business for a long time. And if you look at kind of the early days of private equity, it was all EBITDA suck as much cash out of the company as possible and whatever's left over we'll figure out what to do with it. It seems like investors have realized, wow, we can actually, if we put a little investment in and do some engineering and some go to market we can actually get better multiples. And so you've got the kind of rule of 30, 35 and 40 where EBITDA plus growth is kind of the metric. How do you think about that and look at that evolution? Yeah, it's interesting because in many ways being capital was started as the antithesis to what you're describing. So we started again as with a strategic lens and a focus on growth and a focus on if we got the long-term and the lasting impact of our businesses right that the returns would follow. And you're right that the market has evolved in that way. I mean, I think some of the dynamics that we've seen has been certainly growth of the private equity business. It's become a much larger piece of the capital markets than it was certainly 10 years ago and 20 years ago. Also with that growth comes the globalization of that business all over the world and the specialization. So you certainly see technology focused firms and technology focused funds in a way that you didn't see 10 years ago or certainly 20 years ago actually being capital interestingly enough we had a technology focused fund in 1989 called Bain Information Partners. So we've been focused on the sector for a very long time but you certainly see a lot more technology investors than you did 10, 20 years ago. How are you thinking about valuations these days? I mean, it's good to be in tech, it's even better to be in the cloud, service software, cloud, if you're looking at some of the companies especially the work from home pivot but a lot of that appears to be many people believe it's going to be permanent. How are you feeling about the both public market and private market valuations and that dynamic? Yeah, well, it's amazing, right? I don't think any of us in March when the COVID crisis was just emerging would have anticipated that come November the markets and certainly the technology markets would be even more robust and stronger than they were say in January, February. But I think it's a testament to the resilience of the technology and just how intricate and intertwined technology has become with our daily lives and how much companies depend on its use and frankly it's been the COVID environment has been an accelerant for many of the ways in which we depend on technology. So witness this interview of course through the cloud and you're seeing the way that we operate our business day to day the way companies are accessing their data and information it's only further accelerated the need for technology and the importance of that technology to how businesses operate. So I think you're seeing that reflected in the market values out there. But for us we're focused on businesses that still have that catalytic opportunity ahead that can more than compensate for the price of entry. So let's talk about this massive investment you guys made in Nutanix 750 million and I guess it's a small piece of your 105 billion but still a massive investment. How did that opportunity come to you? What was your thinking behind that investment and what are you looking for in terms of the go forward plan and growth plan for 2021 and really importantly beyond? Yeah, absolutely. Well, we're thrilled to be partnered with and invested in Nutanix. I think it's a terrific company and our most recent technology investment in our private equity business. It really came about through proactive efforts that we had in the spring. We've got a team focused on the technology sector focused across infrastructure and applications and internet and digital media businesses and financial technology. And through those efforts we were looking for businesses that we felt had faced some dislocation and their market values associated with the COVID environment that we were facing but that we thought were really attractive businesses well positioned, had leading solutions and had substantial and discontinuous growth opportunities. And as we looked through that effort we really felt that Nutanix stood out just as a core leader and in fact really the innovator and the inventor of the market in which it competes with a substantial market share and position solving a really important problem for its customers with a big growth opportunity ahead but the stock price had come down because the business has been undergoing a transition and we didn't think that that was fully understood by the market. And so we saw an opportunity to partner with Nutanix to invest money into the business to help to fund its transition and its growth and to be partners along for all the value of the business will continue to create. We think it's a terrific company and we're excited to be invested. Well, you and I have talked about this, that transition from a traditional license model to one that's an annual recurring revenue model which many companies have gone through. Adobe certainly has done it. Tableau successfully did it. Splunk is kind of in the middle of that transition right now and maybe not well understood. You've got companies like Datadog and Snowflake again to doing consumption-based pricing. So there's a lot of confusion in the marketplace and I wonder if you could talk about that transition and why it was attractive to you to actually place that bet now. Yeah, absolutely. And as you say, a number of companies at this point have been through various forms of this shift from selling their technology upfront to selling it over time. And we find that the model of selling the technology over time is one that can be powerful. It can be aligning for customers as well as for the vendor of the software solutions. And Nutanix in particular, again, we saw all of the ingredients that we think make this an opportunity for the business. Again, market leading technology that customers love that is solving a really important problem. The technology, because Nutanix had been grown and bootstrapped under the leadership of Dirich when it was built and founded, had been selling its software together with an appliance often in a upfront sale and has been undergoing under their own initiative a transition from selling that software with an appliance to a software-based model to one that's more rattle over time. And we thought that there was the opportunity to continue that transition and by doing that to be able to offer more growth and more innovation that we can bring to our customers to continue to fund that shift. So something that frankly was well underway before we invested. As the business makes this transition from collecting upfront to more evenly over time, we saw a potential use for our capital to help to fund that growth. And we're just focused on being a good partner to help the company keep investing and innovating as it continues to do that. I was talking to somebody the other day, Dave, and I told him I was interviewing you and I was mentioning the Nutanix investment. I said, I'm definitely going to cover that. And as part of this, you know, Cubon cloud program, and they said, Nutanix, that's not cloud. I'm like, well, wait a minute, what's cloud? So we heard Andy Jassy at re-invent, talking a lot about hybrid. Antonio Neary, right after HPE made its last earnings announcement, he came on and said that, well, we heard the big cloud player talk about hybrid. And so the definition is changing. But so how are you looking at the market? Certainly there's this hyper-converged infrastructure, but there's also the software play. There's this cloud play. Help us squint through how you see that. Absolutely. So Nutanix, as you alluded to, pioneered the market for a hyper-converged infrastructure for bringing compute and storage and networking together, you know, often in private cloud environments in a way that was really powerful for customers. And they could of course continue to be the leaders in that marketplace, but they've continued to innovate and invest in ways that can solve problems for customers and related problems across the hybrid cloud. So combining both the public cloud with that private cloud and across multiple public clouds with things like clusters and lots of innovation that the business is doing in partnership with the likes of Amazon and Microsoft and others. And so we think that Nutanix has a powerful role to play in that hyper-cloud world, in a multi-cloud world and we're excited to back them in. Well, I think too, what maybe people don't understand is that not only is Nutanix compatible with AWS and compatible with Azure and GCP, but it's actually going to create an abstraction layer across those clouds. Now, there's two sides of that debate. Some will say, well, that has latency issues or yes, it reduces complexity, but at the same time it doesn't give you that fine-grained access. That's kind of the AWS narrative. Customers want simplicity and we're seeing the uptake across clouds. I have a multi-part question for you, Dave. So obviously being very strong in strategy, I'm curious as to how much you get involved in the operational details. I mean, obviously 750 million, you've got a stake there. But what are the two or three major strategic considerations for not just even just Nutanix, but cloud and software infrastructure companies and how much focus do you put on the operational and what are the priorities there? Absolutely. Well, we pride ourselves in being good partners to our businesses and helping them to grow, not just with our capital, which I think is, of course important, but also with our split equity and our human capital and our partnership. We can do that in lots of ways. It's fundamentally about supporting our businesses, however, is needed to help them to grow. We've been investing in the technology sector as I described for over 30 years. And so we've built up a set of capabilities around things like helping to partner with the sales force of our companies, helping them to think about the ways in which they allocate their research and development and their innovation, ways in which they continue to do acquisitions to further that pipeline. We've supported businesses in lots of ways, but we're not engineers, we're not developers. Of course, we're looking for businesses that are fundamentally great. They've got great technology. They solve problems for customers in a way that we could never replicate. That's what's amazing about a business like Nutanix and just over a 10-year period of time, it literally has customer satisfaction levels that we haven't seen from any other infrastructure software company that we've had the pleasure of diligence over the last several years. So what we're focused on is how can we take those great products and offerings that Nutanix has and continue to support them through the further growth and expansion in areas like the further sales force investment to expand them to these new areas like clusters that we were talking about and thinking about things that they can do to further expand the strategic fold. And so, we have a large team of big capital, as I mentioned, 260 investment professionals in our private equity business alone. About a third of those are just available to our companies to help support them with various initiatives and efforts after we invest and we'll certainly, of course, make all of those available to Nutanix as well. Somebody was asking me the other day, what's hyper-converged infrastructure? How did that come about? And I was explaining, well, back in the day, you'd buy some servers and some storage and you'd have a network and you'd sort of have different teams and you'd figure it all out and put the applications on top, test it, make sure it all works. And then the guys at VCE and VMware and Cisco and EMC, they got together and said, okay, we're going to bolt together a bunch of different components and pre-test it, here you go. There's a SKU and then what Nutanix did was actually really transformational and say, okay, we can do this through software. And so, and now, that was what, late, late 2000s. Now, we're sort of entering this new era, this next generation of cloud, cross-clouds. So I wonder how you think about, based on what you were just talking about, the whole notion of M&A versus organic. There's a lot of organic development that needs to be done but perhaps you could buy in, or inorganically through M&A to actually get there faster. How do you think about that balance? Look, I think that that was an articulate, by the way, explanation of, I think that the origins of hyper-conversing infrastructure. So I enjoyed that very much. But I think that with any of our businesses and with Nutanix, we're of course looking at, where are we trying to get to in several years and what are the best ways to support the business to get there? Of course they'll, primarily, that will be through or continue to organic investment in the company and all the innovation in the product that they've been doing. Will the company contemplate acquisitions to further achieve the development goals and the objectives for solving pain points for customers to get to the strategic places they're trying to get to, of course. But all as a part of the package of what's a good fit for the company and its growth objective. I mean, with the size of your portfolio, I mean, you're a full-stack investor, I would say. Is there any part of the so-called tech stack that you won't touch, that you would actually not walk but run away from? Well, I wouldn't say that we're running away from anything, but the questions that we're asking ourselves are is the technology that we're investing in durable? Is it advantaged? And it does have a growing role in the world. And if we think that those things are true we're absolutely thrilled to invest behind those things. If there are things that we feel like, that's not the case, then we would tend to shy away from those investments. We've certainly found opportunities in businesses that people perceived as one, but we believe to be another. Well, so let me ask you specifically about Nutanix. I mean, clearly they achieved escape velocity. One of the few companies actually from last decade, it was Nutanix, Pure, not a whole lot of others that actually were able to maintain independence as a public company. What do you see as their durability and their moat, if you will? Yeah, absolutely. Well, clearly we think that it's a very durable and very advanced business, thus the investment. Look, we think that Nutanix has been able to offer the best hyper-converged infrastructure product in the market, bar none. One that has got the best ease of use is the most nimble and flexible for customers. And you just see that, recently in customer feedback and also that plays across very heterogeneous architectures in a way that is really, really powerful. Because of that, we think that their best position to be able to leverage that technology as they have been to continue to play across both public and private hyper-cloud environments. And so we're excited to back them in that journey. It really starts from solving an acute customer pain point better than anybody else can. And we're looking to back them to continue to expand that vision. Yeah, well, I've talked to a lot of Nutanix customers over the years, and that is the fundamental value proposition is it's really simple, very high customer satisfaction. So that makes a lot of sense. Well, Dave, thanks very much for coming on theCUBE and participating in theCUBE on cloud. Really appreciate your perspectives. Wish you best of luck. And hopefully we can do this again in the future. Maybe face to face. Yeah, face to face maybe something, Dave. I know, Dave, I really appreciate it. It's been a pleasure and good luck with the rest of your interviews. All right, thank you. We'll keep it right there, everybody. For more CUBE on cloud, this is Dave Vellante. We'll be right back.