NetApp's View on Broadcom's Acquisition of VMware
January 31, 2023 | 6:00 PM - 6:20 PM UTC

Join theCUBE and NetApp for an in-depth conversation exploring the industry-wide impact of Broadcom's acquisition of virtualization pioneer VMware. As an integral player in this ecosystem, NetApp weighs in on a number of market factors for this special presentation by theCUBE.

Gain actionable insights from this deep-dive into a shifting market, striving to address undeniably complex cloud environments.

Phil Brotherton
VP Solutions & Alliances NetApp
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>> Hello, this is Dave Vellante, and we're here to talk about the massive $61 billion planned acquisition of VMware by Broadcom. And I'm here with Phil Brotherton of NetApp to discuss the implications for customers, for the industry, and NetApp's particular point of view. Phil, welcome. Good to see you again.

>> It's great to see you, Dave.

>> So this topic has garnered a lot of conversation. What's your take on this epic event? What does it mean for the industry generally, and customers specifically?

>> You know, I think time will tell a little bit, Dave. We're in the early days. We've, you know, so we heard the original announcements and then it's evolved a little bit, as we're going now. I think overall it'll be good for the ecosystem in the end. There's a lot you can do when you start combining what VMware can do with compute and some of the hardware assets of Broadcom. There's a lot of security things that can be brought, for example, to the infrastructure, that are very high-end and cool, and then integrated, so it's easy to do. So I think there's a lot of upside for it. There's obviously a lot of concern about what it means for vendor consolidation and pricing and things like that. So time will tell.

>> You know, when this announcement first came out, I wrote a piece, you know, how "Broadcom will tame the VMware beast," I called it. And, you know, looked at Broadcom's history and said they're going to cut, they're going to raise prices, et cetera, et cetera. But I've seen a different tone, certainly, as Broadcom has got into the details. And I'm sure I and others maybe scared a lot of customers, but I think everybody's kind of calming down now. What are you hearing from customers about this acquisition? How are they thinking about it?

>> You know, I think it varies. There's, I'd say generally we have like half our installed base, Dave, runs ESX Server, so the bulk of our customers use VMware, and generally they love VMware. And I'm talking mainly on-prem. We're just extending to the cloud now, really, at scale. And there's a lot of interest in continuing to do that, and that's really strong. The piece that's careful is this vendor, the cost issues that have come up. The things that were in your piece, actually. And what does that mean to me, and how do I balance that out? Those are the questions people are dealing with right now.

>> Yeah, so there's obviously a lot of talk about the macro, the macro headwinds. Everybody's being a little cautious. The CIOs are tapping the brakes. We all sort of know that story. But we have some data from our partner ETR that ask, they go out every quarter and they survey, you know, 1500 or so IT practitioners, and they ask the ones that are planning to spend less, that are cutting, "How are you going to approach that? What's your primary methodology in terms of achieving, you know, cost optimization?" The number one, by far, answer was to consolidate redundant vendors. It was like, it's now up to about 40%. The second, distant second, was, "We're going to, you know, optimize cloud costs." You know, still significant, but it was really that consolidating the redundant vendors. Do you see that? How does NetApp fit into that?

>> Yeah, that is an interesting, that's a very interesting bit of research, Dave. I think it's very right. One thing I would say is, because I've been in the infrastructure business in Silicon Valley now for 30 years. So these ups and downs are, that's a consistent thing in our industry, and I always think people should think of their infrastructure and cost management. That's always an issue, with infrastructure as cost management. What I've told customers forever is that when you look at cost management, our best customers at cost management are typically service providers. There's another aspect to cost management, is you want to automate as much as possible. And automation goes along with vendor consolidation, because how you automate different products, you don't want to have too many vendors in your layers. And what I mean by the layers of ecosystem, there's a storage layer, the network layer, the compute layer, like, the security layer, database layer, et cetera. When you think like that, everybody should pick their partners very carefully, per layer. And one last thought on this is, it's not like people are dumb, and not trying to do this. It's, when you look at what happens in the real world, acquisitions happen, things change as you go. And in these big customers, that's just normal, that things change. But you always have to have this push towards consolidating and picking your vendors very carefully.

>> Also, just to follow up on that, I mean, you know, when you think about multi-cloud, and you mentioned, you know, you've got some big customers, they do a lot of M & A, it's kind of been multi-cloud by accident. "Oh, we got all these other tools and storage platforms and whatever it is." So where does NetApp fit in that whole consolidation equation? I'm thinking about, you know, cross-cloud services, which is a big VMware theme, thinking about a consistent experience, on-prem, hybrid, across the three big clouds, out to the edge. Where do you fit?

>> So our view has been, and it was this view, and we extend it to the cloud, is that the data layer, so in our software, is called ONTAP, the data layer is a really important layer that provides a lot of efficiency. It only gets bigger, how you do compliance, how you do backup, DR, blah blah blah. All that data layer services needs to operate on-prem and on the clouds. So when you look at what we've done over the years, we've extended to all the clouds, our data layer. We've put controls, management tools, over the top, so that you can manage the entire data layer, on-prem and cloud, as one layer. And we're continuing to head down that path, 'cause we think that data layer is obviously the path to maximum ability to do compliance, maximum cost advantages, et cetera. So we've really been the company that set our sights on managing the data layer. Now, if you look at VMware, go up into the network layer, the compute layer, VMware is a great partner, and that's why we work with them so closely, is they're so perfect a fit for us, and they've been a great partner for 20 years for us, connecting those infrastructural data layers: compute, network, and storage.

>> Well, just to stay on that for a second. I've seen recently, you kind of doubled down on your VMware alliance. You've got stuff at re:Invent I saw, with AWS, you're close to Azure, and I'm really talking about ONTAP, which is sort of an extension of what you were just talking about, Phil, which is, you know, it's kind of NetApp's storage operating system, if you will. It's a world class. But so, maybe talk about that relationship a little bit, and how you see it evolving.

>> Well, so what we've been seeing consistently is, customers want to use the advantages of the cloud. So, point one. And when you have to completely refactor apps and all this stuff, it limits, it's friction. It limits what you can do, it raises costs. And what we did with VMware, VMware is this great platform for being able to run basically client-server apps on-prem and cloud, the exact same way. The problem is, when you have large data sets in the VMs, there's some cost issues and things, especially on the cloud. That drove us to work together, and do what we did. We GA-ed, we're the, so NetApp is the only independent storage, independent storage, say this right, independent storage platform certified to run with VMware cloud on Amazon. We GA-ed that last summer. We GA-ed with Azure, the Azure VMware service, a couple months ago. And you'll see news coming with GCP soon. And so the idea was, make it easy for customers to basically run in a hybrid model. And then if you back out and go, "What does that mean for you as a customer?", it's not saying you should go to the cloud, necessarily, or stay on-prem, or whatever. But it's giving you the flexibility to cost-optimize where you want to be. And from a data management point of view, ONTAP gives you the consistent data management, whichever way you decide to go.

>> Yeah, so I've been following NetApp for decades, when you were Network Appliance, and I saw you go from kind of the workstation space into the enterprise. I saw you lean into virtualization really early on, and you've been a great VMware partner ever since. And you were early in cloud, so, sort of talking about, you know, that cross-cloud, what we call supercloud. I'm interested in what you're seeing in terms of specific actions that customers are taking. Like, I think about ELAs, and I think it's a two-edged sword. You know, should customers, you know, lean into ELAs right now? You know, what are you seeing there? You talked about, you know, sort of modernizing apps with things like Kubernetes, you know, cloud migration. What are some of the techniques that you're advising customers to take in the context of this acquisition?

>> You know, so the basics of this are pretty easy. One is, and I think even Raghu, the CEO of VMware, has talked about this. Extending your ELA is probably a good idea. Like I said, customers love VMware, so having a commitment for a time, consistent cost management for a time is a good strategy. And I think that's why you're hearing ELA extensions being discussed. It's a good idea. The second part, and I think it goes to your surveys, that cost optimization point on the cloud is, moving to the cloud has huge advantages, but if you just kind of lift and shift, oftentimes the costs aren't realized the way you'd want. And the term "modernization," changing your app to use more Kubernetes, more cloud-native services, is often a consideration that goes into that. But that requires time. And you know, most companies have hundreds of apps, or thousands of apps, they have to consider modernizing. So you want to then think through the journey, what apps are going to move, what gets modernized, what gets lifted-shifted, how many data centers are you compressing? There's a lot of data center, the term I've been hearing is "data center evacuations," but data center consolidation. So that there's some even energy savings advantages sometimes with that. But the whole point, I mean, back up to my whole point, the whole point is having the infrastructure that gives you the flexibility to make the journey on your cost advantages and your business requirements. Not being forced to it. Like, it's not really a philosophy, it's more of a business optimization strategy.

>> When you think about application modernization and Kubernetes, how does NetApp, you know, fit into that, as a data layer?

>> Well, so if you kind of think, you said, like our journey, Dave, was, when we started our life, we were doing basically virtualization of volumes and things for technical customers. And the servers were always bare metal servers that we got involved with back then. This is, like, going back 20 years. Then everyone moved to VMs, and, like, it's probably, today, I mean, getting to your question in a second, but today, loosely, 20% bare metal servers, 80% virtual machines today. And containers is growing, now a big growing piece. So, if you will, sort of another level of virtual machines in containers. And containers were historically stateless, meaning the storage didn't have anything to do. Storage is always the stateful area in the architectures. But as containers are getting used more, stateful containers have become a big deal. So we've put a lot of emphasis into a product line we call Astra that is the world's best data management for containers. And that's both a cloud service and used on-prem in a lot of my customers. It's a big growth area. So that's what, when I say, like, one partner that can do data management, just, that's what we have to do. We have to keep moving with our customers to the type of data they want to store, and how do you store it most efficiently? Hey, one last thought on this is, where I really see this happening, there's a booming business right now in artificial intelligence, and we call it modern data analytics, but people combining big data lakes with AI, and that's where some of this, a lot of the container work comes in. We've extended objects, we have a thing we call file-object duality, to make it easy to bridge the old world of files to the new world of objects. Those all go hand in hand with app modernization.

>> Yeah, it's a great thing about this industry. It never sits still.

And you're right, it's- >> It's why I'm in it.

>> Me too. Yeah, it's so much fun. There's always something.

>> It is an abstraction layer. There's always going to be another abstraction layer. Serverless is another example. It's, you know, primarily stateless, that's probably going to, you know, change over time. All right, last question. In thinking about this Broadcom acquisition of VMware, in the macro climate, put a sort of bow on where NetApp fits into this equation. What's the value you bring in this context?

>> Oh yeah, well it's like I said earlier, I think it's the data layer of, it's being the data layer that gives you what you guys call the supercloud, that gives you the ability to choose which cloud. Another thing, all customers are running at least two clouds, and you want to be able to pick and choose, and do it your way. So being the data layer, VMware is going to be in our infrastructures for at least as long as I'm in the computer business, Dave. I'm getting a little old. So maybe, you know, but "decades" I think is an easy prediction, and we plan to work with VMware very closely, along with our customers, as they extend from on-prem to hybrid cloud operations. That's where I think this will go.

>> Yeah, and I think you're absolutely right. Look at the business case for migrating off of VMware. It just doesn't make sense. It works, it's world class, it recover... They've done so much amazing, you know, they used to be called, Moritz called it the software mainframe, right? And that's kind of what it is. I mean, it means it doesn't go down, right? And it supports virtually any application, you know, around the world, so.

>> And I think getting back to your original point about your article, from the very beginning, is, I think Broadcom's really getting a sense of what they've bought, and it's going to be, hopefully, I think it'll be really a fun, another fun era in our business.

>> Well, and you can drive EBIT a couple of ways. You can cut, okay, fine. And I'm sure there's some redundancies that they'll find. But there's also, you can drive top-line revenue. And you know, we've seen how, you know, EMC and then Dell used that growth from VMware to throw off free cash flow, and it was just, you know, funded so much, you know, innovation. So innovation is the key. Hock Tan has talked about that a lot. I think there's a perception that Broadcom, you know, doesn't invest in R & D. That's not true. I think they just get very focused with that investment. So, Phil, I really appreciate your time. Thanks so much for joining us.

>> Thanks a lot, Dave. It's fun being here.

>> Yeah, our pleasure. And thank you for watching theCUBE, your leader in enterprise and emerging tech coverage. (upbeat music)
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