 Hi everybody, welcome to CUBE Conversations. This is Dave Vellante and I'm with Stu Miniman. We're going to give you a preview of VMworld 2014. It's coming up. It used to be Labor Day, kicked off the fall season, how it's VMworld, Stu. Absolutely. So, VMware is interesting, right? I mean, five plus billion dollar software company growing 18% a year, things are all looking good. Ecosystems growing, but there's some interesting transitions going on at VMware now. What's going on? Sure, Dave, so VMware, boys, it expanded. This will be our fifth year bringing the CUBE to the show. It was very much about the hypervisor. And of course, the last couple of years, many have said the hypervisor has been commoditized. The competition has been shipping away. At VMware's lead, last numbers I saw was VMware at about 64%. I think Microsoft said like 16%. And Red Hat wasn't far behind, you know, double digits, I think 11, 12%. So, starting to see some encroachment. But VMware is still the standard in the data center. And VMware's been growing into the new areas, heavy in cloud with like the vCloud hybrid service. The software defined data center is the main strategy to extend the hypervisor. So everything going on in the storage and network virtualization world. And trying to, you know, grow the TAM for VMware's business without eating its whole ecosystem. A real tough thing to do. We said when Pac Elsager took the reins of the company that he needed to be able to do for VMware what Intel has done so well for more than a decade which is continue to differentiate, keep that leadership without eating the companies that helped grow where they started from. And what a run, right? I mean, it's like a football dynasty really. I mean, you're talking about some of the market share, you know, gains or ebbs and flows. But VMware really still is the dominant hypervisor. But it's not just about the hypervisor anymore, right? The theme of the conference is no limits. So what does that mean to a practitioner? No limits. Well, right, so Dave, if the virtualization administrator has become, you know, critically important to running the data center in many ways, VMware's helping to get out of those silos. It's not just about storage or networking or, you know, my individual bespoke piece of hardware but it is making rather than the hardware the asset that I manage, whether it be the server or the like, it's the virtual machine has become the management layer. And the question we've had is, you know, is that going to be the limit or will the application in the future really take things over with things like Docker really taking a lot of buzz over the last year and, you know, it definitely will be encroaching in on the message at VMworld? Well, ever since I've been in this business, it's really the applications are really what's driving the value. So let's talk about Docker a little bit. We asked Pat Gelsinger at EMC World about Docker and the whole notion of containerization and increasing developer flexibility such that they can, you know, write code and have it deployed on any cloud. And his comment was, well, who's got the best container technology and, you know, the largest container platform in the world is VMware. But Docker is causing a lot of people to sort of kind of rethink the whole application paradigm. What's going on there in your mind? Yeah, so Dave, first of all, I expected VMworld that we're going to see VMware embracing Docker even more because while Docker definitely can give you some portability not only between clouds but between hypervisors. We've seen Red Hat with the latest Red Hat 7 just build Docker functionality right into the top. So if I'm doing Linux, you know, Red Hat Linux, I get the Red Hat virtualization there and I can get Docker on top of it. We've heard Microsoft moving forward with some Docker initiatives. I mean, Satya Nadella made a comment during DockerCon that Azure is working to be able to embrace Docker. So of course we're going to see Docker at VMworld. I know there's at least a session. Bangaloupe from Docker is going to be on stage, you know, in one of the sessions with the VMware people. And of course we're going to get Docker on the CUBE program to dig into it a little more. So let's talk a little bit about the ecosystem. On VMware's last quarterly conference call, they talked a lot about NSX and NSX adoption, they seem to be very enthused. They said they couldn't be more pleased with Visan. You know, these are fundamental parts of the stack that any software company, that's a platform company, is going to continuously eat away at, right? And force the ecosystem to find new territory. How is VMware's relationship with the ecosystem? Is it, how is it changing? And you know, again, what does it all mean? Yeah, so very interesting because they come, NSX and Visan come at things from really the opposite end to the market. So NSX was really built back when it was NYSERA to deliver network virtualization and allow, you know, the largest networks in the world to be able to simplify their operation using things like overlays and underlays so that I'm not managing equipment anymore, it's going to allow services to be delivered in the network the way that in many ways they are from a compute standpoint. And it's been a delicate balance that VMware needs to partner with the hardware companies because of course, the software needs to live somewhere eventually. And there are competing, you know, positions out in the marketplace, most notably with Cisco who's got application-centric infrastructure or ACI as to where they think it should go. Of course, Cisco very much wedded with, you know, this is the software of the future and of course it's going to work with our hardware, maybe a little bit of flexibility on some of the controllers and the like as opposed to VMware is, here's our software and you're going to be able to choose who your hardware vendor is, whether it be, you know, a Rister, HP or Juniper or a bunch of the other new players or even white box equipment, things from Cumulus and others. So that, you know, is giving a lot of options and we're definitely seeing, you know, some hits in the marketplace from what I hear, you know, they're making some good progress. The latest that they said is they have hundreds of customers that are in some level of deployment of NSX and there's definitely huge fud in the marketplace trying to slow down or stall what's going on. Do you want me to pause there or do you want to talk about these? Well, you know, I wanted to comment on what you said. I mean, it used to be pretty clean, right? A software company, they love all hardware companies where hardware agnostic and, but now with the whole software defined data center, you start to see software really in a viable way encroach upon traditional hardware markets. You see Intel getting deeper and deeper into software. Microsoft actually getting a little bit into hardware or at least picking at the stack. Certainly Oracle is now, you know, big chunk of Oracle's revenue comes from hardware post-sun acquisition. So we're sort of seeing that, that re-consolidation of the stack and of the value chain. So I guess my question on the ecosystem is if you're an ecosystem player, do you feel as though, yeah, I said it again, we'll come and talk about EMC and the whole federation, that VMware is giving clear direction to the ecosystem so they know where the white space is, where their swim lanes are. Are they doing a good job there? So I think for NSX they are and an interesting thing is if we talk about VSAN, some of the rumors that we're hearing is that VMware is going to come out with some kind of, I guess you might call it a hyper-converged solution, the code name that keeps getting thrown out is Marvin, in which case it's going to be VMware VSAN with an appliance and sold. So if you talk about those swim lanes, you know, VSAN is a software solution, they've got, you know, technology partners, what they call the VSAN ready nodes with the likes of Dell and IBM. And I think Cisco might even have one and looking for server partners that can work with VMware. And if VMware offers their own option there, then it kind of breaks down those swim lanes as you will and VMware is going to be encroaching on them. The note I'll say on that is while NSX is trying to hit some of the largest parts of the market, VSAN is starting out into the smaller environments, typically companies that either have a project or just want all their storage isn't going to fit on a traditional storage array. In many ways it's still, you know, looking to displace that dumb J-Bod, you know, DAZ type technology, because VSAN is server-based technology, what we've called server-san at Wikibon and they're taking that to the next step and eventually it can grow and be disruptive against other companies, closest to things like what Nutanix does and maybe a little bit what SimpliVity does, but eventually it could go into kind of that mid-market storage array business which is a very busy market these days. Let's talk a little bit about clouds too. I mean, last year, the year before, a lot of buzz around OpenStack, but the real action in cloud is still Amazon AWS, Microsoft Azure is really coming on strong. You know, the vCloud hybrid service, you know, you get mixed opinions on that, you get mixed results, but very clearly, you know, the big whales, Amazon, Google, Microsoft are breaking the ice, setting the trends there. What's going on? How does VMware compete? We know they compete in hybrid cloud on-premise, but long-term, how do they compete? Give us the cloud update. Yeah, Dave. So first of all, a year ago, Pat Gelsinger told the partner community when Amazon wins, we lose. So was trying to make it very much a war of Amazon versus the VMware ecosystem. And what's been a tough sell on that is from what I hear from the ecosystem partners is they're not sure how to add value and really make good money and good margins on what VMware is doing with vCloud hybrid services. We saw it EMC world this year. That has now become, vCloud hybrid services become a federation asset, which means that not only is VMware and VMware's partners selling it, but EMC is using it as their, a good piece of their cloud strategy. So you're gonna have EMC sales reps and the channel partners all trying to push this, but it's still not clear to me how all the partner community and the services can help grow that. So it is moving forward. It definitely has matured a lot in the last year, but I would say that VMware's hybrid strategy still lags behind what Microsoft is doing with Azure. Of course most people have that Microsoft applications inside and working with things like Office 365 and the cloud. And of course Amazon is still the clear leader in the public space. So VMware, while they are a huge leader inside the data center, they haven't quite figured out how to nail that go-to-market partner strategy and the applications going forward is to, where is VMware's place in the application portfolio because most of it, it's either Microsoft or it's Linux and they have strong competitors there or it's going pure in the cloud with what Amazon's doing or really I guess the close partner that VMware has is Pivotal who we expect to see some at VMworld but that gets back to the federation. Yeah, so I mean you see Amazon growing very, very rapidly although in the last quarter there was indications that because of pricing pressures didn't grow so I think it grew 38% year on year. Still enormous growth for an organization that's going to do four to five billion, probably closer to five billion this year. You're seeing Microsoft make inroads. They peaked up in the Gartner Magic Quadrant. Google seems to be getting more serious although it's Google so you never know how committed they are. But Dave, I mean VMware does not compete against that race to zero cloud. It is the Amazon and Google and Microsoft and you're not going to see VMware coming out here saying we're going to drop our prices five times a year and compete with these guys. It's a different value proposition. But one could argue, Stu, that the outsourcing business, that notion of outsourcing infrastructure, provisioning and deployment and all the heavy lifting associated with that is now getting cloudified and we'll have marginal economics that are very much more like software. So the fact that they don't compete in that so-called race to zero because they can't compete really in that race to zero, is that a threat to companies like VMware and EMC and IBM and HP because they don't have the volume? Yeah, so definitely, Dave, it's going to be the real challenge over the next three to five years is to where do the applications live? Of course, VMware's done a great job of allowing my existing infrastructure, my existing applications to live on and they're trying to extend that into the cloud. So companies that are moving slowly, VMware's going to keep up with them, going to be able to take what you have today and extend it into some kind of futures. But for those that are willing to jump right into the cloud mobile world as it were, it's going to need to be either through Pivotal, through Amazon, or through someone else and VMware is threatened to be left behind in a world like that. Well, the argument is that there's going to be a lot of hybrid clouds, you talk to customers and they believe that. But one has to wonder what's the blind spot out there that nobody can see? If the economics dramatically change, maybe the customers can't see what's coming or maybe the corner office, like we heard at Phillips last week, totally changes how they're going to do business with companies. So obviously we'll be watching that. So I've slipped a couple of times, injecting EMC into the equation, that's the big elephant in the room, Elliott Management, Elliott Asset Management has said they want to EMC to fully divest of its, or at least largely divest of its VMware ownership. Currently EMC owns about 85% of VMware. Over half its market cap. EMCs. Over half of EMC's market cap is accounted for by the value of VMware's stock that they own. So a lot of people are pressing EMC to fully divest of, or at least largely divest of VMware, give up that controlling stake and let the flowers bloom. So I don't think that's ever going to happen. Certainly under Tucci's watch, but Tucci's going to retire next year supposedly, right? That's the word. What do you make of all this? Do should EMC divest of its VMware stock? Would it be a good thing for VMware? Would it be a good thing for EMC? Would it be a good thing for the industry? So Dave, we've heard Joe Tucci speak many times that the federation plan is the plan. This isn't something they're trying. This is something that they're hugely committed to. It's not an experiment, right? This is not an experiment. And my take on it is I'm actually impressed by this strategy. So Dave, I've been involved with the EMC VMware relationship since the beginning. I was at EMC at the time it happened. I was one of the first handful of people working on it. And to be honest, the relationship between EMC and VMware went through a huge up and down. So the year and a half before the acquisition, EMC was a very strategic important partner. EMC, largest storage player out there. I was calling up lots of EMC's partners to help get VMware equipment, educate them, work on their roadmap with them. After the acquisition itself, it was funny for a couple of years from an engineering standpoint, EMC had to be the least of the storage partners. So HP and IBM and Dell and NetApp had to get things before EMC did. So it actually slowed down some of the engineering work. Change in management happened on both sides. Diane Green left, and management changed on the- Left. Left, yes. And we're seeing some of Diane's companies showing up in the ecosystem again, which is quite interesting. But if you talk from a strategy standpoint, many of the companies I talked to talk about EMC and VMware in the same breath. At the very top, we know that they are joined at the hip and they're going in a certain direction. Now, of course, the position of the Federation is they're going to compete against each other and they're gonna give you choices. So if you wanna do Pivotal, you can run that on Amazon. If you're working with VMware, of course, you're gonna work with all the other storage guys. And from an EMC standpoint, they're gonna move forward. They made some great announcements recently with Microsoft Azure. Not as close with Amazon these days, but it's not just about VMware. So all of those three major pieces are going to work with the other partners and they're gonna drive a joint strategy forward that I think makes a lot of sense. I don't see how it benefits EMC to get rid of the VMware asset. It only helps them to have those kind of under that joint management. Yeah, so whether or not it's better for VMware or the ecosystem or the industry is sort of academic because in my mind, there's no way EMC is gonna give up this asset. It would be stupid in my opinion for EMC to do that. What would be the motivation? They are able to get VMware value. The market certainly understands VMware's value proposition. The issue, there's a lot of value of EMC's core business that's locked inside of EMC. But my feeling is that over time, markets will determine whether or not that value should be unlocked. And I would think it would be just really a dumb move for EMC to spin that up because EMC without VMware is a much less interesting company, much less strategic for CIO. So now with the Federation story, they can go in and make that argument much stronger. We're starting to see some interesting solutions. So a vCloud hybrid service is the platform for cloud. There's EMC services that are on top of that. There's pivotal services that are on top of that. Things like the desk tone acquisition that VMware made plays into some of these components. V blocks potentially fit into those vCloud hybrid services. So the interplay between the members of the Federation give them some nice offerings. So as long as EMC's throwing off cash, it's going to keep buying VMware stock to keep that 85%. Let's talk about mobile and end user computing. Sanjay Poonan is about a year in now. Sanjay Poonan is an executive that VMware hired from SAP. Sharp guy made the AirWatch acquisition big moves. We've seen VMware do many iterations of what used to be called VDI and is now they call it term as end user computing. Are they getting it right? So first of all, Dave, I think they're getting it right because it's now a mobile strategy. I remember before the AirWatch acquisition, I was talking to Brian Madden and I said, how do they have a real end user computing strategy and not a VDI strategy? And it was they need MDM. So AirWatch fills that gap. They did the desk tone acquisition to help bring some of the desktop solutions to the cloud. And I think we're starting to see a more unified, not just end user computing on its own, but it feeds into the cloud strategy. It feeds into the rest of the VMware strategy and the rest of the Federation strategy. So that's a strong play for them. All right, Stu, we got to wrap it up. I'll give you the last word. You got your VM, your Vexpert shirt on. So congratulations. You've been a Vexpert for several years now. Small group of cadre of individuals that are sort of very much into the VMware ecosystem and understanding what's happening both technically and from a business standpoint and from the ecosystem. So what should we be watching for? Just give us the summary at VMworld 2014 in San Francisco next week. Okay, so first of all, Dave, as we said, if it's no limits is the theme of the show, where are the limits? Is the ecosystem going to help VMware drive things through? VMware needs the ecosystem to help them with vCloud Hybrid Service, with vSAN, with NSX. Where does VMware have room to grow or have they hit the limit for their growth because the competition's going to be there? By the way, quick little surprise. I'm expecting at least one acquisition from VMware at the show. It's something we've actually seen a couple of times with EMC lately. They use the show to kind of bang off some announcements. So if I was going to have to put down a bet, I'd say something in the cloud space. Here the DevOps might be something that we'll hear more talked about, but it's still, it's one of the best shows of the year. It's probably one of the largest infrastructure shows of the year. It's one of the largest cloud shows of the year. Many of the vExperts come. By the way, Dave, it's over 500 vExperts around the world and many of them are paying on their own dime to come on into the show. I'm excited. I'm going to be part of something called Opening Acts on Sunday, which is being done with the V Brown Bag Group and the VM Underground Party, which is a fun party of really smart people in the virtualization community on Sunday. But Opening Acts, they're going to have three hours, total of six panels, and I'm going to be talking about cloud there so people can definitely check that out at the site. And of course the cube. So Dave, we'll be having everybody from Pat Gelsinger on down, going to have the Docker guys on, going to have broad spectrum of cloud networking, storage, end user computing on the cube. So of course everybody can always watch that on SiliconANGLE.tv. Yeah, so VMworld is, it really is the premier enterprise events, do a lot of diversity, a lot of good vibe going on at that show. Large crowds, what is it? 20K plus, 25,000? It was to 20, 23 last year. Yeah, so good action going on there. As Stu said, check out the cube. We'll be there. Tweet us and thanks for watching everybody. Thanks Stu for coming on and giving us the preview. Thanks Dave, looking forward to the show. I'll see you next week. The cube is live at VMworld 2014 and thanks for watching everybody. We'll see you next time.