What Earnings Mean to Infrastructure Decisions & VMware Changes Their Licensing!

Well, good morning folks. It is Infrastructure Matters number 61. And I am here with my co-host, Keith Townsend.

Um, I think we're both getting into the winter season. You've got a little bit of a, a great sweater going on there, and it's getting chilly out there. It is.

Uh, you know, I'm call, I'm calling in. I think we still say that, calling in from Chicago. So yes, that time of year, Halloween was, we're recording this the day after Halloween.

Halloween was a little bit warm, but we're getting a proper November 1st. Yeah. And we got snow finally this week.

Finally. So we covered finally. So we'll keep giving the snow report so the people can kind of figure out when they wanna come out to Colorado and innovate our mountains again.

So We, we little known fact the towns and spent Christmas in Colorado last year, and it was about as magical as you could ever imagine was. It's, I, I recommend. Yeah.

Yeah. It, it is worth it. I, I've done many, many a weekends up there.

It's fabulous. So what we have on tap today is we are going to be talking earnings, um, and impact on earnings. So this week there is a whole bunch of them ing out some of them that I haven't even had a chance to really kind of get into and take a look at.

Um, and then, uh, some VMware licensing. Are we tired of talking about this yet? No, I guess not.

No. Just like, we're not tired talking about AI or cybersecurity. Right.

So there we go. Um, so we'll kick it off here. Um, maybe Keith, if you wanna start out with, uh, maybe talking about the VMware licensing stuff.

What's going on there? What's happening there? So why, why are we talking about this again, is a good question.

Uh, we had a pre briefing on the announcements for VMware explorer e next week of this recording. And VMware snuck in a really interesting announcement that was, that hit on Halloween, which was that they're returning back to, they're returning the sku, like hot time has been merciless when it comes to reducing the SKUs. They're bringing back enterprise plus licensing.

So before, you know, the, before this decision, only two real options for VMware v Sper on premises was v VMware, uh, foundations, VVF, which is basically just the hypervisor and vCenter. And, and you needed to jump up to VCF, the full cloud solution to get VMware licensing. One was $50 a a, a core, the one was a $750 a core.

There was no in-between Enterprise Plus, which I think a lot of customers will really be rejoiced to hear is returning, which is about $350 a core. So a good in-between offering, Well, what does Enterprise Plus include? So Enterprise Plus includes VMware, vSphere, uh, the hypervisor, vCenter, and some advanced functionality.

So I think the important thing to understand, what does, uh, VMware foundations not include VMware foundations includes vMotion, because you need vMotion, but DRS is not there. So DRS dynamic, uh, resource scheduling, I think is the acronym. Yeah.

The ability, basically, if you have a large number of clusters or not large number of virtual machines, this auto balancing of the VMs, uh, the maximums are higher when it comes to the sizes of VMs. It is just the, I think it's today the floor or where you want to get in when it comes to capability around technical capability around vs. Spear.

And then it's also the only one that of the, originally, and I didn't get to ask this question, but if you wanted to add HCI to the, to your platform, you couldn't do that with VMware Foundation because it didn't have all the features you needed for HCI. So just much more feature rich Pro product, what most enterprises actually use is in enterprise plus it used to be the king of the, uh, of the sku. Okay.

So that makes life a whole lot more palatable for the enterprises. So this entire migration thing might just blow up and go away. I think people are still pretty mad, but from a practical sense, yes.

I mean, I, I was doing some back of the napkin math for basic cluster, like something that we would have in our lab if we had to pay for VMware licensing, we would probably have to pay somewhere around $21,000 or $24,000 a year for VCF. This is like just a three pot cluster with eight core per cluster. That number basically gets cut in half for VMware, uh, uh, enterprise Plus, which is the functionality we need.

We don't need, you know, vRealize for, to monitor, uh, performance, all of the things that come, the vCloud director, et cetera, all of these cloud enabled features. And I think that mimics the enterprise. Most enterprises, uh, especially in the midsize company size, the, the, the not top 2000 customers, they just basically need basic virtualization and some of these advanced features.

So I, I think this will stop the bleeding for a lot of, uh, VMware customers looking to exit VMware. Well, and that's as you say, okay, so what you're saying is I, now I need to go. I was, I couldn't be on that.

I had to be on another call, but that is, could have some significant impact on a couple of other companies. Yeah. So if you look at like the Nutanix situation, their target is that mid-enterprise.

It's not always the mid-enterprise. I mean, they have very large companies as well that use their system, but you know, they're going after them. Now, that doesn't mean to say the people that aren't already saying, Hey, I have an option here to move to a, you know, a HV, um, which is their virtualization.

I won't consider it now. Um, because it, it's, it's relatively good and, you know, solid piece. Um, it's less of a, you know, solid.

It's, it's more better than the Red Hat option, let's put it that Way. So it is, it, it is absolutely a more enterprise family than some of the, uh, other open source based, uh, solutions. And I think price wise, it gets to be a a bit more competitive now.

Right. Because now I don't have to refresh my entire hardware stack. I know Nutanix had the relationship with, uh, Dell and Power Store and separated the compute from the storage a bit.

But your, if you still want to a HV, you still needed to buy net new hardware. And this, I think, changes the math for a lot of, not just customers, but competitors, people who are looking at OpenStack, uh, to replace VMware vpe, which is more of a competitor to VCF than it is to Enterprise Plus this is, you know, I'm, I'm surprised like the mainstream tech media has not picked up on this. 'cause this is a big deal.

Well, it's a huge deal. I mean, when I also think about clients that are using, you know, being from the storage side, of course they have to bring it up. But if you're using network attached storage to support this, now I have a real option to do it.

I mean, I don't have to go to VC U, which is what exactly they were forcing you to do. Well, you knew weren't forcing you to do, but you were forcing you to buy it, but you weren't using it. So it's kind of like, I don't know about that.

I don't know about that. Yeah, They, they were very much encouraging to use it. And then a another, uh, which you will actually love, I didn't put this in the show notes.

5 x for the same licensing point. 5 terabytes of, uh, HCI storage. Wow.

Well, you know, um, I, I kind of expected this to happen in some way. I mean, it's one of those things is, it's kind of like the overland, you know, window thing. You know, you, when you go to negotiations, you just, you're gonna throw the window way back up and the wife brings it partially the way or the other, other way around.

I'm the one that throws the window up and he brings the window down. Yeah. That, that's, that sounds pretty accurate.

The, Uh, and then so somewhere along the lines, you find out where those pressure points are, which is what he's done. And, and I had a, you know, what I was looking at is saying somewhere in December, he was gonna start saying, okay, now I got an idea about what, what the impact of this is, you know, what do I need to do? And which is a super smart move in terms of a, a negotiation position in terms of re-looking at the market and resetting the market.

So, um, kudos to Hot Tan and the team for, you know, doing what they're doing. And, um, there we go. Yeah.

And one, one last, Jim, from the whole VMware thing, I talked to one of the 2000, um, customers, that strategic customers, and he told me that, uh, they ended up in a really good place with their Dell, uh, VxRail and VMware licensing. He's, he's satisfied. So that is that I think Broadcom has become more reasonable than what they initially put out.

Yeah. Well, okay, cool. So we've got a couple, as I said, there's a whole lot of earnings coming out, and I always go through the transcripts and that kinda stuff and take a look and see what kind of gems we can pull out of it other than just the, the big earning numbers kind of saying, trying to look at that more from a, a CIO's perspective, not as an investor perspective, but a, how are people doing?

What, what's the success? Where is the trending going, and what are people doing in that? Um, so I'm gonna take the first one, which, um, is, and then we'll take the Google and Microsoft and a couple of others here.

But first one that, and I spent some time with it is Commvault, you know, and that's a you data protection company. Um, you close to a billion dollars in terms of what they're in, in the market. Um, they were always a sleeper, you know, back when I was kind of the poor stuff of it.

And they're no longer a sleeper. Oh my God. I mean, I'm looking at these numbers and I was like, there's, you know, how do you do pull this out?

I mean, I, I'm looking at numbers. They're saying year over year, 16% revenue up, 37% subscription revenue, um, free cash flow, 34% up. Um, you know, normally I'm not citing these things.

I mean, I'm looking at these numbers of, of where, what they have done. And it's like, you know, and it's like my, my problem with the numbers is what are you gonna do next quarter? It's, it's gonna be really, really dramatic, you know, in terms of, you know, can, can you keep this up, keep this up to where it is going?

So, um, very, very substantial. I mean, when you look at what's going on with here, Keith, it's one of the things that is really cool is looking at the, um, how, well it's looking at how the AI is driving some of this, which it is driving some of that discussion of it. But really the, you know, the big piece of it course is the cybersecurity, but those two are now kind of linked together.

And what the, where those linkages come together is that as I roll out my ai, there is exposure, you know, there's exposure for people worming their way into your inference engine and altering it. You know, there is exposure in terms of, you know, some, some maybe internal, you know, person going in there and saying, I don't like, you know, I'm getting, I'm leaving the company. I don't like this company, and I'm gonna put code in there that causes, um, faulty outcomes, um, or, or sleeper code that's in there.

So all of this kind of stuff, you start to looking at the cybersecurity issues that we have and data protection, which has never been part of HPC market, we, we'd never used it for that. Now it becomes core to what's going on in the ai, and we're gonna start to see these companies like the, the Commvault coming and bringing out some of the things that, you know, will really, really, um, address the, the market as it evolves. Um, so it takes a bigger stage.

Um, and we figured it would take, you know, a good year for this kind of stuff to come out to, to actually be of importance. Uh, and, you know, because everybody's focusing on, you know, the first thing which is going out and training, and they still are, but they're also concerned about, you know, how everything is gonna end up panning out on in the long run in terms of when they roll these, these applications out the door. So that's kind of my thoughts about that.

I'm not sure, um, you know, the, the other piece to the big thing is the multi hybrid, multi-cloud stuff. So you're seeing, and we're gonna see some more rollout, especially as we get to, you know, ignite time. And when we're talking, you know, with Microsoft and on the reinvent coming up, we're gonna see series of announcements coming out on this side of the house, but looking at, so really how do I tie these two, two environments together and keep the cost down, um, because it does get pretty pricey up there.

If you're don't watch it, you're get surprise bills. So that's kinda where that one came out. Any, any thoughts, feedback, whatever?

Yeah, Convault has been a really interesting play over the ne past few years, right? They've made that big purchase of the hyperconverged solution a couple of years ago, or a few years ago now. Uh, it has been a steady product.

They came out with Metallic, which is, you know, their hybrid cloud, uh, data protection solution. And data protection in general has become, I wanna say, in Vogue, right? They, they, they re a lot of these companies have rebranded themselves as security plays.

They're not truly security customers. I mean, uh, companies, but to your point, they're a critical part of not just ransomware recovery, but the types of recoveries that you're talking about. These snapshot is, and time people are getting really serious about high availability, disaster recovery and re and the, uh, the, the real RTO recovery, recovery time objectives and being able to recover from, whether it's malicious, malicious attempts or, uh, natural disasters.

And Commvault, ironically, you know, we look, we could look at Commvault as kind of one of the more traditional legacy players in a, in a, in the market, but they've become pretty critical to most enterprises because they back up the stuff that's still super mission critical and they've, you know, adjusted well with the metallics of the world. So, absolutely agree with you. This is a critical part of your infrastructure, uh, uh, plans.

If you are not paying attention to companies such as kaball, as part of your security PS or part of your ai, uh, data mobility planning, you absolutely should, uh, refresh your, your, your knowledge on. And one of the things they did buy, so you mentioned Metallica, which is heavy, is their piece. That was the SaaS offering that's out of Azure.

They recently picked up lumon, which was, is had focused on AWS. So they're gonna bring out, you know, a kind of equivalent pieces on both of those sites. So that should be really successful.

So let's go into the other, we used, you had some time with Google this week, so we had some Google earnings that came out. Um, can you wanna talk about where they're at? How are things going, Their cloud?

You know, I think the big thing, uh, they're up Google Cloud, not Google, the big company. Google the big company is up, I think, alphabet. Yeah, yeah.

Uh, yeah, alphabet is big, uh, big. But Google Cloud, since they broken out the reporting, uh, couple of years ago, up 35% year over year, they are, uh, I think the term is killing it. That is, uh, exceptional growth.

And there's, and, and I think one of the things that surprises me about that number is that when I'm talking to customers, still to this day, Google Cloud is very much still the third cloud provider of the big three. I still AWS still dominates the conversation as Microsoft with their special licensing agreements and positioning with both enterprises is the second dominant, uh, one that I talk run into when I talk to customers. And Google Cloud has maintained kind of this secondary third tier, uh, option within multi-cloud scenarios.

I'm not seeing enterprises adopt them as their primary cloud. This 35% year over year growth gives me pause to think that Google may be finally getting into their groove, obviously with earnings and growth to become the primary cloud provider for a lot of, not just SaaS and SaaS first companies, but enterprises. When we looked at the cloud providers, it must have been three years ago, and how people were looking at the different companies, um, we saw Azure being the primary because you had 365, you were used to it and that kinda stuff, that there was an easy lift for the enterprise, um, AWS because they were the dominant player and the first first GU of the block and were really ahead of everybody with the services they brought.

And then the third one was Google. And what we saw clients using Google for was anything that had to do with data analytics. Um, they were doing a really good job of integrating their capabilities for data analytics analysis, et cetera, within their systems.

And I can't remember the names of all their products. They get 'em perfused about who's got which one names. But so companies that were looking at that big stuff at that time, which at the time we weren't calling it ai, we were calling it data analytics or big data analytics.

Now fast forward to the ai, of course, open AI and Microsoft paired up. So there was a huge push there. But, you know, Google's been well known for search and analysis and algorithms.

So they're, and you know, they've had a couple missteps on their, um, LLM that we've seen, but they've pulled back and they've looked at, okay, so how do we make sure that we do this with diligence and, um, you know, making sure that we don't have bias, et cetera, that we bring out there. So I not surprised that that it, they've picked up because of where customers were already looking at them for their smarts in the analy. I mean, if you're gonna three, five years ago, if you're gonna talk to anybody in terms of analytics and algorithms, that's who you want to talk to, because they kind of had it, you know, they had the search engine, right?

And so that kind of gives a, you know, a halo effect, I think, on terms of what they have and then what they know how to bring out. Plus the fact that, you know, maybe they were the Kubernetes lead. So I don't, I don't find that unexpected really.

Yeah, I don't find that unexpected as, as well. Although I think 30, 35% growth is pretty impressive. But we had them at AI field day five, I believe it was, and they walked through, you know, calling Gemini from Cloud run their Kubernetes container runtime solution, and their developer experience was really, really tight.

So to your point, you know, three years ago it was all about big Curie and being able to run big Curie and AWS or, you know, uh, against your dataset, OnPrem, et cetera. They were the multi-cloud of choice, but they've also strengthened where they're at when it comes to developers and being able to consume Gemini and other L element LLMs from within their development platform. I think probably their, where if I was to assess their gap, uh, is at that business user, user level.

Like business users can go in and use, uh, Amazon queue, which is I think a direct competitor to Big Kary. And, you know, I went in to do some stuff and Gemini and Cloud run, and I very much had to put on my developer head. It was not intuitive from a SS user perspective.

So there's a lot of opportunity to grow, capture not just that developer harden that, you know, that Linux geek, but also, uh, uh, get to this business U user and this ability to serve the generic business analyst. And I think to get, to really, to get this AI to get to market, we have to go there because it can't just be the developers that can deliver on this. It has to be ubiquitous across the different business units to deliver on for an ease of use standpoint.

So, very much so. Let me touch on Microsoft, um, numbers there. They too, um, you're looking at Azure as a 33% growth.

Um, although the market gave them a, a ding, um, on the stock because they said that they were expecting 32 to 33% growth next quarter, and they wanted to hear 34%, which I, I'm like going really seriously. I mean, again, I am not an investor. I give somebody else the responsibility to do that for me.

Um, but I was kind of, you know, whatever. I mean, it's kind of like they have done, and most of that they talked about is being driven by the ai, and the AI has done incredibly well, um, you know, their ai and they continue to grow in that space. So we're gonna continue to see that.

But the, the set at the same time, the noise about bringing everything, being, bringing things on prem is also there. So I think we still have quite some time to kind of get through, you know, what's gonna, how this is all gonna end up being deployed, but you know, yeah, we're gonna see the AI training, et cetera, maybe in the cloud and then, you know, or continuing to bring it down onto prem. So, because I don't wanna, you know, expose my data, um, you know, we'll, we'll see how this pans out.

But yeah, the Microsoft numbers were, um, you know, really, really good, um, for, for this, uh, last quarter. Yeah, and, and actually pa I was talking to Patrick Morehead about just this overall concept of where we're gonna see ai, and I think our intuition is leading us to the same spot, which is companies, many end user organizations are going to start to pause me. I think me and you naturally understand the data silo problem.

I think there's a secondary problem that's coming up with process silos. As we companies figure out how they're going to use ai, there's no standards on how to transfer those processes from one AI solution for the next. So if I'm doing something open AI and I wanna accomplish the same thing using SAP Juul versus doing the same process and service, now, how do I spread my technical resources to implement those same processes?

So there's, I think, a opportunity for companies like Microsoft, Google, AWS, uh, VMware to an extent with their infrastructure technologies to create common platforms so that we can transfer, uh, processes. So Microsoft, you know, this is not just about training software, company, company with the chops to solve these types of problems and not just solve the problem from a process portability perspective, but actually run the processes in Azure. So yeah, that again, doesn't surprise us at all.

So when you talk about processes, I know we talk about, you know, getting the data through the pipeline and that kinda stuff, and, and there's the processes for development is what you're really talking about, right? So is the process about how do I, can I, if I use, if I like any other, maybe we could talk about as a language, maybe looking at a large language model, like a, a a programming language. You know, I bring down open AI as my large language model, you know, as opposed to whatever.

And another time I wanna use granite from somebody else, you know, for IBM. But how those get used are different. So they're not interchangeable is that's what you that's that's what you're talking about.

Yeah. So let's, you know, and one of the things, uh, our, Keith Kirkpatrick wrote a really great piece, uh, a few months ago now on the position that SaaS companies like SAP, ServiceNow, Smartsheet, these incumbents are advantaged that they can put the AI directly into the solution. So let's say I built a AI process within, uh, SAP that took my, um, order data, uh, used that, that data to then do some level referencing and SAP's AI cloud that then generated net new advertising campaigns.

So I've done that logic within SAP, now I wanna take that logic and move it to a different system within my environment, because I've spent the, the, the time developing the logic. I wanna reuse it. Well, how do I reuse, reuse it?

This isn't a language that's portable in a sense. This is, you know, SAP did a great job of making it possible for my business analyst to create the logic, but it's not like I'm lifting a busy old stand. So, and then taking it to another AI uh, system and reproducing that output, I have to now go back and handcraft the solution again in basically a different language for a different platform.

So this process portability problem is, you know, a second level problem, you know, let's, let's get the value, but it's absolutely something to keep our eyes on. Yeah, absolutely. And I think we'll see some more tools coming out with it.

So quickly, one last topic that we wanna just, just touch on here. Um, super micro, um, the news here is that the auditors resigned, financial auditors resigned, um, haven't exposed why. Um, but obviously there was some differences of opinion about what things were going on, and if you added to some of the noise that's going on and the deferral of their, um, financial submissions, um, I think it was the 10 K report.

Um, those all give, um, pause as to what's going on and, um, I guess confidence. Yeah, If you're an enterprise customer and super micro is your primary, uh, server and infrastructure provider, develop a relationship with HPE, Dell, Lenovo, Cisco, whatever, have a backup plan. I've worked for a auditing firm for a while.

Uh, auditors, especially the big four of the world, and this is ENY, they don't easily fire their, their, uh, especially a publicly, uh, publicly traded company. They don't easily fire their clients. They bend over backwards to work with them.

If they fire them and say that they will not stand behind the, uh, financial statements of management. There's, there's not smoke, there's fire. We just gotta find out where in the organization they aspire.

But absolutely have a, a, you know, have an exit strategy for supermarket. Well, and this gets back to the, you know, what we saw with CrowdStrike, you need to have multiple vendors. You know, being a single vendor, single environment, um, strategy is not the wisest thing.

It's, it makes it a simpler, It's, it's a risk. You know, it's not always possible you, but you should, you know, you, you should have a tabletop exercise, at least how you would exit a vendor. That's a good point.

Tabletop exercises around crises, any kind of crisis, what's solve my risk and everything else. Well, I think that's it. We've spent almost 30 minutes here together.

It's been great. Um, I love talking to you, Keith. I learned so much and I hope our listeners have learned a whole lot as well.

Um, we'll just keep on going. We will be back. Are we back next week?

I, yes, I believe we are. Yeah, we are back next week. We are back next week.

I know I'm be, and I'm traveling, but it might be Diane and, and Keith on this. So thanks for tuning in and no, don't forget to follow us, like send it over to your friends, that kind of stuff. Thank you.

Have a great day.