 When I was a young analyst at IDC, I remember sitting in a packed boardroom listening to this new company called Teradata, Introduce a Machine that was specially designed to make databases run much faster, far less cost. At the time, the most advanced disk drive in the world was 2.5 gigabytes, and it cost more than $100,000. It was the size of a giant refrigerator. There was not a single data center in the U.S. that housed a terabyte of data underscoring this young startup's moxie over the name like Teradata. Fast forward nearly 40 years and the company is still going strong. It has a robust tech stack that has been matured and hardened over the decades with capabilities around things like referential integrity, sophisticated workload management, and support for complex joints and many other factors. Recently, the company's financial performance has been in the news with an earnings and revenue beat in a large part attributed to its cloud business model. The stock roughly doubled in a few days as surprised investors took notice. Welcome to this CUBE Conversation. My name is Dave Vellante and we're here with Steve McMillan who's the CEO of Teradata to give us the update. Steve, welcome. Hey, Dave, it's great to be here. Thanks for having me. Okay, so you're very welcome. So what's happening with Teradata? What's behind the recent surprise and the momentum that you're seeing? Look, Dave, I think over the last 12 to 18 months we've just been continuously improving our cloud capabilities and the performance of our cloud business. I took over as CEO of Teradata in June of last year. And it's been my pleasure to really focus the company on a cloud-first agenda. And what that's really meant is that we've built a great leadership team with some key new appointments, a new chief product officer, a new chief strategy officer, and most recently a new chief revenue officer to really build up our cloud credentials and capability. We've also done things like completely invert our R&D spend. So we spend nearly $300 million on research and development every year, but previously our focus about only 30% of our spend was in cloud. We'll flip that around to have 70% of our investment in cloud and 30% on-prem. Enabling us to do things like go general availability of Teradata and Google Cloud in Q3 of last year. And lots of these investments and moving that investment envelope has really enabled us to put forward Teradata as a very relevant modern cloud platform for our customers. And that's enabled us to win in the cloud fairly significantly. And we always knew that at some point we would declare to the street what our cloud revenues were, but we wanted to make sure that they were substantial and relevant. And we felt that at over $100 million of ARR and with an outlook to double that this year, that those were the kind of metrics that we're going to get the market and our customers' attention in terms of us being modern and relevant. I got a lot of questions based on that. Thank you for that front. But so let me ask you. So you took over as CEO less than 90 days into a global pandemic. And so how much did that affect your thinking around cloud first? Did you come in before that, knowing this is the direction you're going to take the company? Was that accelerated? Can you comment? Look, I think taking over a Teradata, you pointed out in the introduction of 40-year heritage, of essentially inventing the enterprise data warehouse marketplace. I knew I was taking over a company with a fantastic heritage and a fantastic culture. A set of people that are absolutely focused on and are incredibly proud of Teradata's technology, its capability and how it can really, how Teradata helps transform how businesses work and people live their lives through data. What I saw is we had to really focus on what the market and our customers were looking for. And that meant re-emphasizing the importance of cloud inside the company. So it was really a lot about focus and then about developing the culture of the company to be able to execute. In terms of the pandemic, I think the pandemic has acted as an accelerant to digital transformation as organizations want to use data to help optimize how they operate, make sure they're operating effectively and efficiently. One of the customer examples that we had in our last quarter was an airline in the US investing in Teradata technology to do just that. Clearly a distressed industry, but they see how the power of data can optimize their supply chain to enable them to work more effectively and more efficiently. Great, I want to get into some of those customer examples. So, but I want to stick on cloud first for a minute. So it sounds like cloud first is a mindset but then leads to sort of investment priorities. And there are some pretty prominent companies that had a switch from a sort of on-prem to a cloud first mentality. I mean, Microsoft is the most obvious, but there are others. But what really does cloud first mean for your customers? Well, what it means is we really think about the future digital strategy of our customers. And clearly all of our customers want to embrace cloud. It's also about data gravity. Where is data moving to? And we see the data gravity of many companies. We focus on the top 10,000 companies in the world where they're operating at that level of scale. Teradata can really give them the right kind of solution that meets their business requirements. But as that data gravity is moving towards the cloud, it really means that we have to be in front of that and we have to have the technology in place to capture that data as it moves to the cloud. And so the vision from a product perspective in terms of cloud first is to be the leader from a connected multi-cloud data platform perspective. And each component of that product description is really important connected in terms of being able to access data either in native object store or in lots of different data sources. Multi-cloud in terms of being available across all of the cloud platforms, but for existing customers extending and reaching into their on-prem capabilities. And from a data platform, thinking about it in terms of the services that Teradata has been known for in terms of enterprise data warehousing, but also real data analytics capabilities that we've built into our core SQL engine. So super excited about the future of Teradata in this cloud first world. Yeah, so that definition of cloud, by the way, of course is evolving as you well know. And I spent a fair amount of my time trying to squint through earning statements and figure out, okay, what's exactly in there? So $100 million in ARRs, that's a pretty big number. I mean, for a lot of companies that's like they're getting ready for an IPO if they're doing that kind of ARR. So what is in that cloud number? I presume there's a hybrid component of that, but can you help us understand what's that definition? Yeah, no, we were very careful with that because we wanted to be assured that we were talking to you all about cloud and being true cloud. So that is just a revenues of our vantage product running an AWS or Azure or Google Cloud. It doesn't include any private cloud or hybrid cloud environment. So we wanted to be really specific about, this is success in the hyperscalar environment and the public cloud environment. Thanks for asking that question, that's great. Thank you for the answer. That's really important. There's so much cloud washing going on. And so it's good to hear that you're making that a clean, what you call the true cloud number, I would agree. That's a great way to look at it. And of course, there's a lot of evolution going on in cloud and on-prem and from a hybrid standpoint, out to the edge. Do you see, so is your cloud strategy to be compatible with the cloud native, AWS, Azure, Google, maybe Alibaba someday? But is your strategy also to try to cross-connect those clouds in some way, which is a kind of metadata challenge? Maybe you could talk about that. Yeah, that's exactly that. When I use the term, you know, connected multi-cloud data platform, that's exactly the point. We see companies wanting to have a data fabric that spans across either from on-prem, if they've got on-prem, but they want to span across that those public cloud environments. Our perspective is that companies seem to have cracked, you know, how to use compute transparently across multi-cloud environments. Our perspective is we want to give that same ability to essentially federate data across a multi-cloud environment because the CIOs I talked to, and I'm sure you do too, Dave, they want optionality in terms of cloud provider. They don't want to be logged into an AWS or an Azure or Google, they want to be able to, you know, keep a competitive environment, competitive sourcing environment, be able to use the right services from the right cloud provider. So from a teradata perspective, one of the other key things about our cloud focus is we're starting to think about teradata advantages, much more of a platform rather than a product. And so, you know, we've got 17 integrations in the product to native cloud services in Amazon alone. We've got 13 in Azure and 12 in Google cloud where we utilize and enable our customers to use those native cloud services in the way that their DevOps teams have become very accustomed to. And I think that level of integration our R&D spend has enabled recently is really positioning in our customers' minds the ability for teradata to be modern in terms of that DevOps and for teradata to be at the core of their data architecture. And then from a, providing a fabric perspective, we've really invested in what we called our query grid technology to really be able to federate queries out across multiple cloud environments. And we've put a commercial model in place that we charge per query. So we don't charge for, you know, per megabyte of storage that we charge for successful query execution. And our thesis says if we open the teradata platform to as many data sources as possible, our customers are going to want to query that data, connect it together and get unique valuable insights that they can't get anywhere else other than using a solution like teradata. So we're super excited about that. I'm excited too. That's kind of the Holy Grail because the other thing CIOs tell me, Steve, is like, look, we've spent a decade in our developers. They got the cloud native thing. They know how to optimize for AWS or Google or Azure. We got that. What we need is we need to enable the businesses. So if you can abstract away that complexity, that's innovation that they want because they want to go faster. And this notion of a federated query, I think what I'm hearing is you've got the, you're building out the knowledge to wherever the query should be serviced, whether it's, you know, remote or local on AWS or Azure or Google or on-prem, you're going to be able to service that query in the most efficient manner. Is that kind of the vision here? That's the vision. That's exactly it as a connected, we enable a connected data fabric, multi-cloud for our biggest customers who are always going to have an on-prem capability. It can reach back into the on-prem system for the data that's stored still on-prem. In terms of the data that travels across with that, it's only the output of the query. So you don't need to duplicate queries. You don't need to duplicate data in lots of different places. But not only that, to your point, this is all about business outcome and use cases and the 40 years of experience that Teradata has in terms of helping customers know how to use data to solve business problems. They get that in the cloud with the Teradata that they know. And so that whole, if they want to migrate from on-prem to in the cloud, if they want to federate, we can give that range of options layer on top of our industry and use case experience to deliver a fantastic overall cloud migration experience to our customer set. I like the pricing model too, because essentially you're charging for value. I mean, I think, you look, we've gone through decades and certainly past decade, a lot of SaaS companies have done really well, but it's kind of a one-way street. And so the charge per query really is a sort of, to me anyway, a gain share. Customers win, you win. As long as you deliver any good product, they'll stay loyal to you. That's right. I think our customers are saying that pricing model released directly to business value. And the total cost of ownership of the Teradata technology is much more efficient and effective, gives a much better TCL, especially with enterprise scale, either data volumes, data complexity, or query complexity, or query concurrency. And it's interesting. I'll reflect back to your opening remarks, right? And not very many people use this. We were born on-prem, but what we're finding in the cloud is that's given us a bit of advantage, because we are used to squeezing every bit of performance out of the storage and compute in the Teradata system. So in our core SQL engine, our workload management and query optimization means that we don't run away with the consumption of compute and storage. What we find from a native cloud provider solutions is to solve these really enterprise scale challenges, they spin up more compute or spin up more storage. And it's an exponential increase in terms of the total cost of ownership. Whereas we believe we give a much more predictable cost profile and performance profile, utilizing the technologies that we honed on-prem. Yeah, that's an important point. I mean, Teradata is by design, it's architected to be a perfectly tuned system. I mean, and so back in the day, it was $100,000 for 2.5 gigabytes, you had better architected it that way. And so, the prevailing way to solve these problems today, there's a lot of waste of skin to cat, but just throwing resources at it is the other way. And that, as you pointed out, can get a little bit out of control, it makes the CFOs nervous. On the earnings call, you referenced two customer situations where you beat out Snowflake for the deal. I wonder if you could add some color and elaborate on that. Yeah, we've been working with a number of customers that kind of kicked the tires on cloud native solutions. And we're delighted to see some of them coming back, recommitting to Teradata. And I think there's really a couple of reasons for that. One is the challenge of migration. Like I think Snowflake mentioned that in their earnings call yesterday about the challenge of migrating enterprise workload. From a Teradata perspective, because what you get in the cloud is exactly the same as what you've got on-prem, we can lift and shift, and then we can look to modernize once it's in the cloud. So it's a dramatically different approach. So there's no interruption to the business users, so it's less risk, less cost, quicker time to value from a migration perspective. So one of those wins with an e-commerce company in the US was because the new CTO came in and said, those 70 engineers they've been working on for the last 12 months. And it was about migrating from, to try and migrate Teradata workload to a cloud native solution. And why don't we just use Teradata in the cloud? Which was a logical question. We were delighted to help them with that answer. And then the other example really was about the projected cost of running in the cloud and how expensive it was gonna be once that organization had scaled up to the level of queries and execution that they were looking, that their enterprise was gonna be generating and also from the growth trajectory that they were anticipating just from a total cost of ownership perspective, Teradata made a lot of sense. And that probably would surprise quite a lot of people out there who have always considered Teradata as being reassuringly expensive. What we're really demonstrating now is when we think about it in terms of query execution and as customers try out alternative solutions to execute the kind of queries enterprise scale that Teradata does every day, we are actually a really good price performance player. Yeah, I mean, I don't think anybody would ever question your database chops. I mean, I think people were trying to understand and by myself was trying to understand, okay, what happens to the on-prem business? And you're sort of connecting the dots there for me. And so my question is, what are your on-prem customers? What's their motivation for moving to the cloud? Are they actually leaning in? Are they kind of many of them putting a brick wall around their on-prem and sort of carving out a cloud agenda? How do you see that evolving? Look, I think, and I'm talking about existing customers rather than when a new customer is here. Our existing customers are going to continue to grow in their on-prem environments. If you look at the market analysis, it says between one in 4% growth per annum for the existing on-prem traditional technologies. So, and we expect that, we expect Teradata to more than gain or share in terms of that one to 4% market share growth every year. But really the growth, the 30% plus growth in terms of year-on-year data growth in the cloud is really driven by that DevOps approach, one to utilize first-party cloud services to augment the technology development that's going on inside organizations. Also, as data starts moving into SaaS environments, being able to do the analytics of that data that's already in a cloud environment and a cloud environment starts to make a lot of sense. So we are investing in connectors to the Salesforce, the service now, so that you can have access to that data from Teradata. So we think that hybrid approach from many of the biggest companies in the world is going to continue to make a lot of sense. But the big growth and I think is going to be in those cloud environments. So as I met the model around Teradata is really holding serve on that on-prem business, low single-digit growth, keep that stable and then you're growing very, very rapidly in the ARR model, the cloud business. And then at some point, what's Teradata? 1.8 billion in revenue somewhere around there? So you got a ways to go before that cloud business is as large as the on-prem business, obviously, but that's the opportunity. And we've seen a number of companies transition through that very successfully. You're obviously communicating to the street. They like this, or there seems to be some upside. People are, the investors are saying, well, this is an undervalued company. You don't have to come up with it. Yeah, no, absolutely. Yeah, no, what I would say is we look at our current ARR, we know that we're going to have a stable base of on-prem ARR for the foreseeable future. But the ability to migrate some of that ARR to cloud is low hanging fruit in terms of growing our cloud ARR. But then what we've seen is once we migrate an on-prem customer to the cloud, it kind of unlocks the Teradata environment for that customer because remember, we usually run all of the mission-critical production workloads. And so that system is like tied tightly down. If you're the CFO, you don't want the marketing team like disrupting your month-end running. But when you're in the cloud to run those ad hoc queries or ad hoc analytics capabilities, then we can spin up and we can elastically grow more storage so that that workload can be satisfied while still protecting those mission-critical workloads and the core SQL engine. So we're seeing the expansion once we move some of those workloads to the cloud and some of those customers to the cloud as being really, really significant. So expanding the ARR that they did have on-prem when it lands in the cloud, we've seen more than 50% expansion rates. I mean, I see the future, you use the term, I think data fabric, I see the future as data warehouse, data warehouse, data lake, color, whatever repository you want. Those are just nodes in my mind within that fabric. And you mentioned marketing. If I'm in the marketing department, I want my own data. I have the context, I know what I need. I don't want to be subservient to some complex data pipeline and data scientists that get permission. I just want to, I want to go for it and create data products. And so, my last question is sort of, there's my sort of simple vision. How do you see the future? Look, I think I'll give an example of telcos who are increasingly trying to move to be techcos. And how orchestration of data across multiple silos in an enterprise can create significant enterprise value. So if you imagine the IoT use case, 5G deployment strategy, you've got all of these 4G handsets, I would just now telcos want to know where all of that usage data is so that they can main that usage data into customer usage patterns to then influence their capital allocation strategy as they build out 5G networks. Yep, so it takes data from the consumer level and puts it into a corporate planning process on the really back end of the company. And so we believe with our connected multi-cloud data platform and our outstanding capabilities in data warehousing analytics, we can get those kind of most complex use cases delivered to our customers really successfully. Hey, Steve, great story, it's clear to me you got your priorities straight. So thanks so much for coming on theCUBE and sharing your story there. Dave, it's been an absolute pleasure. I hope to do it again. All right, you got it. And thank you for watching everybody. This is Dave Vellante for theCUBE. We'll see you next time.