In this part, Dan and Luis talk about CAPEX vs. OPEX vs. aaS models, the modern consumer mindset and Day1 products.

Transcript:

Dan Allaby: You know it’s interesting, so just starting to shift gears a little bit more into a customer perspective, one of the things that we had highlighted in the invite that we felt would be relevant to spend a few minutes on is: when we talk about how solutions—when you’re bringing solutions together around the cloud, and I see this with our team around our packaged offerings and how that’s evolving, you quickly get into—as you’re bridging the data center and the cloud—one of the things you have to address is the CAPEX vs. OPEX vs. aaS model and we certainly see from an industry trends point of view around our technology suppliers, a definite move to bridging that gap from the traditional CAPEX model into an aaS model and we’re seeing that widespread across both hardware and software-based technology suppliers. But from a customer perspective, that was more from a supplier point of view, how is that relating to what you’re seeing with your customers? And how important is that point to them? And what are you guys doing around that?

Luis Benavides: So CAPEX and OPEX I kind of view as asset ownership. “Okay, CAPEX, I’m gonna own whatever it is. Whatever it is that’s in the box, I’m going to own that box.” The OPEX piece, you know, it’s a different color of money and somebody else owned it and I’m buying things in a subscription or maybe even leasing though leasing is a bit more CAPEX. I think that’s kind of a different way of buying nature, and then there’s the as a Service piece. Yes it’s a service oriented or operational spend like an OPEX, but I think that’s a bigger thing to tackle. I’ll get to that in a second. One of our mantras, and it’s the same I’ve heard from customers from my time again back in—before Amazon—back in NetApp and EMC, when talking to customers, you have these changes that were introduced probably consumerization of IT where they want things like they have at home; they want it like their cell phone bill, they want things in a utility and they always say things like “One vendor. One Bill And as a Service.” And we’ve kind of adopted that now, and I think when you look at as a Service in this world of what it takes to deliver these things as a service, we’re talking about third party applications, we’re talking about perhaps data center footprint for colocation, we’re talking about Telco lines to connect these data centers to cloud data centers and then you’re talking about the cloud provider behind it and then that’s the Amazon Web Services component as we see it. And that’s a lot of moving parts, and that’s a lot of different vendors involved, and not any one of those vendors is truly responsible for solving all of that for the customer, right? I think that again falls back onto the channel, which is guys like us. And if we can solve a lot of that for the customer, then I really view it as back to their risk or mitigating risk or really focused on the customer experience side of it. That’s what we’ve been asked for, that’s what we’ve been asked to do and that’s what we want to provide, right? Most of the time, it starts getting into that world of they want it as a service, they want to get out of the data center business, they want to outsource some of it’s capabilities but then they do pull some things back so it’s not exactly like everything’s going to be only as a Service, or only OPEX, or only CAPEX. Very likely, you’re going to have a blend of all three.

Dan Allaby: Yeah and I think the more the data center and the cloud have to evolve together. Obviously a lot of customers, mid and enterprise particularly have made some pretty big investments in terms of the cloud, and there’s a meshing of their investment and a transition of some of that, and depending on who you talk to the majority of that into a cloud model but I think part of that is, you know, also that comes with that, is the conversion from a CAPEX/OPEX thinking model to an aaS model and as we converge these solution more and more, I see us having to bridge that gap more and more as time progresses.

Luis Benavides: I was going to add to that, you know, cloud is very much of a data center conversation now. It’s not cloud. It’s not necessarily private. It’s not necessarily public. It’s, like I said, for us what we’re finding is a data center enterprise strategy and then taking in those models, like we said; CAPEX, OPEX and aaS.

Dan Allaby: We were joking around before the call, sort of an elephant in the room if you will in this area is, and maybe we can spend a second, we’ll kind of move into some more deeper dive solutions and use cases of the customer perspective. When you look at the characteristics of cloud everyone’s heard in the older days, the definition of cloud and agility and it’s gotta be scalable and it’s gotta be at a manager cost, you know, how important is cost and agility to customers these days from your perspective? And the elephant in the room is, from a private cloud point of view, as customers are evolving their infrastructure models and their capabilities in their data centers, can you achieve those benefits with private clouds vs. leveraging an Amazon Web Services public cloud strategy? Maybe some comments on the evolution of the data center and the relationship to, and importance of cost and agility to the customer.

Luis Benavides: Yeah, that’s a loaded question, so it’s a big topic. You know, I see the perspective of the Amazons; Jassy kind of talking about the dinosaurs of the world and things like that. And trust me, I absolutely get that first-hand. And then on the other side, you know, again, having previous experience at EMC and NetApp, seeing what those companies have been doing and others in that same space around private cloud. But like I said, back to the customer side of it; I don’t disagree that you can build very agile and get a lot of benefits out of a private cloud deployment, but you’re still going to always have folks in IT buying things on AWS because cloud is—very much a characteristic of it is it’s on-demand nature, right? You can get it with a credit card. You can get started with a credit card. It may not necessarily always end up that way but, you know, cloud means on-demand capabilities; that kind of fast nature of delivery. And I think that’s where the strategies are, again, becoming very blended now. There’s different industry perspectives of that, around, you know, saving everything on-prem, in a purely cloud model and building up those capabilities but there’s still limits of capacity vs. when you’re incorporating more and more cloud resources like from AWS, I think that’s where you’ll find that workloads focus instead is kind of what we’re seeing, not necessarily—sometimes sensitivity of data sets—but far more of a workload focus. What’s the right workload to move to the right? —The right being AWS or to the left being on-premise. And I even think Andy Jassy has said that it’s not as if that world is going to go away, but by workload, there’s going to be decisions on what’s going to remain behind or remain on-prem and what’s going to move into the cloud. And that’s kind of why we say that the data center strategy really expands and incorporates both type models. So, like I said, I think it’s—maybe it’s more of a knob that you turn to the left and turn to the right, but I think it’s a little bit more fluid than that where it’s not exactly something that’s gonna stay 50-50 or stay balanced—or excuse me—stay over time, I think really what customers are looking for is the ability to move those workloads around on and off-prem.

Dan Allaby: It’s interesting, you know, we work with a wide variety of partners and everything from Resellers, System Integrators and full fledged Managed Services Providers that are even regional cloud providers or even national for that matter—one example, we have a cloud provider customer who probably does in the vicinity of 70-80 million a year in cloud services—and they were looking for ways to extend and leverage public cloud services, specifically Amazon. Because of some of the limitations they have at their scale around ability to invest CAPEX, and so, that issue, you know, of CAPEX vs. aaS and the ability to scale quickly is applicable at pretty large scales in terms of customer profiles.

Luis Benavides: Yup and I’ll even add that—so when you’re looking for things, or characteristics of a private cloud, and we talk a lot about the agility and ability to get things moving pretty quickly in that on-demand nature from, kind of, the public cloud world or maybe even private cloud world but when you look at things like—how do you define that? Right? How do you define what private cloud is? What a public cloud is not—and I think that’s where the lines are blurring. We’ll have a blog on our website that actually deep dives into this but, what we’ve found in that conversation around the private piece; the network security aspect of it, the data security/data privacy piece of it, seem to be the areas where there was most sensitivity to, right? You know, “how do you handle data spillage?’ Or whatever else it may be; “how do you handle being able to pull disk drives back up from a data level, right? And from a network level, I need to keep people outside of the network? How do I extend my network into the cloud? And I think that’s where, from that kind of customer perspective/customer demand—I know we’ll touch on this but a solution like NetApp Private Storage for AWS, in our view of the world, solves a lot of that. You incorporate things like dedicated instances even in AWS if necessary where you’re locking down that fox in the compute resource and then you’re isolating the network with Virtual Private Cloud and driving Direct Connect, and then even further on the data side, you have data policies that don’t change. So again, I think, you know, back to that private/public or however you want to view that world, it is blending, it is coming together, but I think it’s coming together, again, because we know what customers are asking for. They’re asking for use capability like Amazon provides or Amazon specifically inches their existing data center strategy. So I think the vendors are being forced where either they have to embrace AWS or they’ll be forced to find ways to embrace it or compete.