On this episode of the Six Five Webcast Infrastructure Matters, hosts Keith Townsend, Camberley Bates, and Dion Hinchcliffe discuss AI’s strategic implications for CIOs and CTOs, alongside a comprehensive analysis of recent earnings reports within the tech sector.
Their discussion covers:
- The strategic importance of AI implementation for CIOs and CTOs.
- A detailed breakdown of the latest earnings reports from leading tech companies.
- Predictions for future technology trends based on current earnings.
- Insight into how businesses can leverage AI for competitive advantage.
- Challenges and opportunities presented by AI in the current tech landscape.
Watch the video below, and be sure to subscribe to our YouTube channel, so you never miss an episode.
Or listen to the audio here:
Disclaimer: Six Five Webcast Infrastructure Matters is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors, and we ask that you do not treat us as such.
Transcript:
Keith Townsend: All right. Action packed infrastructure matters. We don’t have a whole lot of time for banter. We are talking about Microsoft Ignite, KubeCon. AWS reInvent is coming at NetApp earnings SuperCompute24. And this is the one-year anniversary of VMware by Broadcom. Someone told me that it went by fast. And I’m like, “Oh, I don’t know how fast it felt for many people.”
Camberley Bates: Everything else is so much more positive. Do we really want to drag that one out?
Keith Townsend: No, we’ll save it. You know what, let’s talk about that first. I have with me Dion Hinchcliffe and Camberley Bates. I’m Keith Townsend, and you’re listening to Infrastructure Matters. Let’s start out with on the low note, one year, VMware being acquired by Broadcom. How has it gone?
Dion Hinchcliffe: Well, I think it’s safe to say that, and the quote I heard just a week ago, is that customers are miserable. But Broadcom is declaring success, revenue is up. They think that the deal has been good for them, despite price increases of 200 to 500%. And you can no longer pick and choose the support services, you got to buy the whole thing. AT&T has dragged them into court. But Broadcom thinks it’s been good overall for them as a business, so there’s at least that to say for it.
Keith Townsend: Yeah, I think I concur, the miserable results from an en user perception perspective, there has been some innovation. If you are in the wheelhouse of VMware Cloud Foundation, then you are the rare customer, this has been a good transaction. Because Broadcom has narrowed VMware’s focus, reduced a ton of SKUs. If you were a cloud-based ARIA user, which is their observability and configuration management and IT management platform, you’ll be a little bit disappointed. If you use VMware Cloud on AWS, you’ll be a little bit disappointed. But if you’re buying into Hawke’s vision of private cloud displacing some of your public cloud spend, you’re probably a little encouraged.
Camberley Bates: It’s an interesting… I think we’ve got another six months of this gnashing of teeth to go on as people finalize their strategy around this and the numbers, and they go through the final licensing, etcetera. But hopefully by June we’re not talking about this anymore. Because between AI, cybersecurity, and VMware, I think that’s all I talked about for the last year.
Keith Townsend: Yeah. The two topics have been AI and migrating from VMware vSphere. Dion, you put this one in the rundown. NVIDIA Day. Happy NVIDIA Day. Well, post NVIDIA Day, it’s kind of like NVIDIA Boxing Day now. But NVIDIA earnings.
Dion Hinchcliffe: Well, it was a beat on the top and bottom line. Like everybody expected, the demands being put on the stock are just tremendous because the street is expecting NVIDIA to blow the doors off every single quarter, but they did. Earnings were up 94% year over year, to 35 billion. That’s astounding. All on the back of AI chips. This is a company that until recently was making most of its money off of crypto and gaming, and now AI. They’re now the AI company. And they’re now the world’s largest company of any kind. This is an amazing result, and it’s all because of GPUs.
Now, we’re hearing persistent rumors that Blackwell has problems. First they had the chip mask issue. Now, the rumors are there’s a cooling issue. But they can sell every Blackwell they make, and then some, for a long time to come. The demand for the infrastructure around AI is just insatiable, and NVIDIA is the company with 90% of the market because of the CUDA stack. The stock was down a little bit after they didn’t blow the doors off, and then some, but now they’re doing well again. And it’s a great story to see, and it’s so good to see that Jensen do as well as he’s done. He’s been with the company since the very beginning, and one of the really bright stories in the industry.
Camberley Bates: The one item that I pulled out of the earnings was the data center revenue. And I know this is ridiculous, but it was only 112% year to year up, as opposed to 154% the quarter before, or 426% the quarter before that. The quarter to quarter change, it was about the same from quarter to quarter. I’m not sure if that really means anything at this point. I know that part of it was that there was this huge purchase that was done last year on the GPUs, and maybe they’ve sat there and not completely been deployed on those numbers. When they say data center revenues, I’m assuming that’s all those GPUs, about whether or not it’s going to AWS, MSP, or the enterprise, they’re not slicing it by that. That was just one item that came out. And then when I was reading some of the financial guys’ reviews on that, that seemed to be a piece that they went, “What’s going on here?”
Dion Hinchcliffe: Or, interesting is people forget how much IT budgets really matter. We talk about, whether we’re talking about Broadcom, it takes a year. There’s a yearly cycle that IT makes a decision in one year for what they’re going to spend the next year, and it takes a lot of work to change that. And this time of year is always the end of last year’s budget, and they’ve probably already spent most of their yearly budget by this time. I wonder how much that has to do with it.
Camberley Bates: Yeah.
Keith Townsend: And then, I think I’m going to send a recommendation to NVIDIA that they just take off all the doors. Blowing off the doors no longer impresses the street. Keeping on this earnings trend, NetApp earnings.
Camberley Bates: Yes, NetApp is continuing to build on their success as a core data storage company that is like data storage that interests you right now. Yes, it is for when we’ll talk about supercomputing. But they’ve delivered some really strong revenues. They’re up about, I think it was 9% of the revenue. But more importantly, there was two pieces, two numbers that came out. And I haven’t gone all the way through the transcript and read all the numbers, but they’re up 19% year to year on they’re All Flash. And part of that is because they have a very large set of customers that are hybrid, and they’re just still moving over. And George Curry has been talking about this for quite some time, is that we have a very large install base that is still there that hasn’t moved over, and I think at some point in time it was 60 or 70%. They’re pulling those people out and they’re doing success, I’m sure with their C-series, which is the QLC.
The second thing that was really good to see is they, for their cloud first party storage offering, they were up 43%. It’s still not a huge massive number. They’re on their way to a billion in that environment for an annual number. But they are finally seeing that uptick that we had expected to see over the years in terms of being… When I say cloud first party, it’s sold by AWS, it’s sold by Azure, and it’s sold by Google. Not marketplace, but it’s sold core to their products. As we go into this next stage of AI, expecting to see some of their file system capability be implemented along with a core block system, core file system for core type of non-transactional processing.
Keith Townsend: Yeah, NetApp has actually done a really exceptional job, I have to say, of transitioning from a storage-only company to a data company. And evasiveness of their solution throughout the three cloud providers is, honestly, leading the market and how you transition from an on-premises company to a cloud-based company without sacrificing a lot of that on-prem revenue. Speaking of on-prem, Dion and I spent a good eight hours, or collectively between dinner and our focus group, about 10 hours with nine CIOs and CTOs in Seattle. And Dion, let’s reflect back on some of the higher level trends that you saw amongst that group. We had folks from bio farmer to manufacturing, farming, high-tech, enterprise, financial services. Yeah, a good group of folks.
Dion Hinchcliffe: It was really excellent to take the pulse of what’s going on these days in IT. And we had the opportunity in this focus group to ask them, what are the biggest challenges they’re facing today? What’s really top of mind? And there was a lot of things, it was very interesting, but topping them all was making AI safe. They were universal, saying that was the most important thing that they’re focused on in terms of the challenges that they have. But the next one is really interesting too, is a value as a service. They really want an easy way to be able to tap into delivering value to their customers in a turnkey fashion. IT is just as hard as it’s ever been these days. The level of complexity and sophistication as at a high watermark, is only going to get worse. And so they’re really looking for ways that they can say, how do I get by to my customers very quickly, very straightforward? That’s really important for me.
And then, I was really encouraged to hear it… Now, I think we did have really enlightened IT folks in general in the session, and that was by design. But tracking success of IT after rollout. Most of the time IT declares once they’ve delivered a system to the internal end customer, they declare victory. And that’s usually step one in the success of an IT system is rolling it out. Then is a long customer adoption and customer success patterns is what we’ve seen on the external side with SAS. And now that’s finally moving into IT. They really want to track success of IT after rollout, making it as success really. And then, rounding out the strongest signals was the changing workforce. We see a second generation of Gen Z arriving. Gen Z’s been the dominant new arrival in the workforce, and they’re the first generation that doesn’t look at their paycheck as the number one thing, they want to do good in the world. But they very much see that just trying to attract that talent, making sure that they feel like they’re getting their other needs, not just a good paycheck, a good compensation as being the number one benefit that they’ve received. IT has to make the IT department a very appealing place to work if they expect this new generation, and these guys were definitely feeling that. That was some of the top, the most, the strongest signals we saw.
Camberley Bates: As you were talking about IT as a service, or as value, a value service being delivered, is there then a trend at all that you picked up from that group about buying systems that are fully integrated to more rapidly deliver? We’ve talked about, we see a lot of this coming out for the AI systems because it’s so difficult to deploy quickly and they need to move fast. And much of what we’re seeing the client, the vendors do is, how do they integrate with all the partners all the way up the stack? Is that something they’re looking… Did they talk about looking at those type of offerings in order to bring more value to the market?
Dion Hinchcliffe: We talked a little bit. One of the signals we got was this real concern around IT fragmentation. You could flip that and you can argue that’s the real challenge is that they do have all these siloed systems. They’re being required increasingly to deliver any given solution. You got to pull data from all over the place, not just your own data sources, but now your data is increasingly being spread across all these cloud systems, all these cloud platforms and SAS offerings. That fragmentation is a real problem. And keeping it all secure while you’re accessing all this federated data that you have across all these applications, half of them reported that was a significant challenge.
Keith Townsend: And Dion, I thought what was really interesting, because you did have a good mix of really enlightened IT leaders, and we found some of the data points that they shared very contrary to some of the data points that you’ve collected over your larger set of CIOs. And this was an outlier that these folks were thinking much beyond, well beyond the average CIO.
Dion Hinchcliffe: Yeah. No, I absolutely agree with that. And that’s what we tend to do, we do broader CIO surveys, IT, automation, cyber security and ransomware as being the top concerns. And these folks are really more concerned about having positive impact with their internal customers, trying to create an appealing workforce so they can continue to attract the best talent. Talents also appears in our broader survey, but these folks put, really, head and shoulders above other things.
Camberley Bates: And I love what you said about delivering AI in a secure fashion, because that’s why one of the things that I’ve been talking about is how that as we get into the enterprise, as they start delivering these applications, it’s going to slow down as they diligently look at, have we trained this right? Do we have this right? Are we assured that we’re not going to have some really weird thing happen out there that it’s going to hurt the company, hurt somebody, hurt the brand?
Dion Hinchcliffe: And this is a classic IT pattern that they often hurt someone in the short-term. To go fast sometimes means you have to start slow, and a lot of people forget that.
Keith Townsend: All right, let’s move from having real discussions with real customers to having real discussions with real customers and vendors at several shows that we’ve been to over the past three weeks. KubeCon, SuperCompute, and Microsoft Ignite, three really major shows with growing enterprise interests. When it comes to KubeCon and SuperCompute, but Microsoft Ignite really in the wheelhouse of most enterprises, and where most enterprises are not just doing AI work but also work around keeping the lights on. Let’s start with KubeCon. Camberley, it’s been a blur of the past two weeks. Remind me, were you at KubeCon?
Camberley Bates: No. I was in Scottsdale. I was chumming it with my friends at Veeam and enjoying the wonderful place down there as they were prodding all their executives. You went to KubeCon?
Keith Townsend: Yes, I went to KubeCon, I spent a couple of days with Veeam. Which, by the way Veeam, nice work on the sneakers. That was a surprise. If you’re not sure what I mean, check out the socials. KubeCon was… Obviously, there’s going to be conversation around AI, but there was plenty of conversation around VMware alternatives. But I want to call out a growing segment of this, which is observability. KubeCon has always been a really great conference for observability in general. And when you think observability monitoring, etcetera, you’re going to think of Splunk.
I actually didn’t say it stink, a lot of companies will say their investment in Splunk is a never-ending drain of hardware. But Cripple was a big point of conversation. We don’t have it in the notes, but Cripple, if you’re not familiar with it, is the open source alternative to Splunk.And I just saw they got a few hundred million dollars in funding just recently. There was a lot of mature conversations around not just how we’ve gone beyond how to deploy Kubernetes. And talking more, how do you take Kubernetes cloud native infrastructure and make it invisible infrastructure? How do you make it something that’s just there and you count on, and it becomes that API to the data center, and as a result, the API to AI? There was obviously a lot of conversation around AI, and how do you manage AI in a DevOps type of methodology?
Camberley Bates: And for what it’s worth, we’re going to talk about supercomputing in a bit. There was no observability and no security guys there.
Keith Townsend: You know what, let’s get into SuperCompute. Because Camberley, I didn’t get as much time on the show floor, but there had to been at least 400 vendors on the show floor of SuperCompute. It was a massive show. Close to 20,000 people now.
Camberley Bates: Yeah, yeah. SuperCompute has been the domain of the professors, the PhDs, and the graduate students, along with all the research labs that come out of the major universities worldwide. And the research labs that we have like Lawrence Livermore, JPL, Fermilab, etcetera. In the past, maybe 5,000 people, you saw a lot of posters being presented, which are papers that are being presented by the graduate students. That was the kind of vibe that you had there. Very, very, very much so technical. I’d go to a session and I glaze completely over because I’m listening to these, HPC, high performance computing people talk about whatever. And I’m not that smart. Nobody hired me to bridge national labs. This has fundamentally completely changed. And this is AI.
This is called going into the enterprise and where the market is going with generative AI.And we have a mix. The labs, it’s not that we’re going beyond the labs, the labs are changing as well. If you listen to some of the people that presented, they are going from a pure HPC environment, which is a lot of batch processing, et cetera, to an environment that they’re doing more data simulation and gen AI, and is a completely different IO configuration, data infrastructure, CPU systems, GPUs, etcetera. And they’re having to build for the next of research as well, because there are researchers coming in and saying, “We’re going to be using this. We’re going to be going into the next direction.”
When you look at the show floor, number one, the biggest thing I felt like was there was all about liquid cooling, because we’re burning up all the power. I mean liquid cooling is front and center. I mean there was a zillion guys out there with something to do. Everything from the piping to the oil or the glycol, and the water cooling and the design of it, and everything else how they would do it. Plus the rack systems that you had. And then, of course all the processors from all the different vendors, the data file systems. You name it, it was there. And I called it the world-class petting zoo for technology, because you really got to see a whole lot of gear, including some quantum computers that were on the floor. Really cool.
Keith Townsend: Yeah, if it had to do with cooling or power, it was at SuperCompute. Immersion water cooling. Lenovo talked about how they’re using and redistributing 45 C water to cool and heat, and recycling that water. And this is specifically water cooling. Somebody asked me, they said “Do you mean liquid keep and not water?” No, water. In submersive. I saw they had an intel board, some first in liquid cooling. The numbers are unmistakable. We’re starting to go from the typical 15 kilowatt rack in the data center, to 60 kilowatt racks being common, to 120 kilowatt racks now becoming a little bit of future proofing. And the most advanced research happening is happening at that 500 kilowatt rack. Can you imagine 500 kilowatts of power going into a rack? Now remember, most traditional data center racks to use full with dual-core servers all the way up to the top of a 42 U rack, it’s about 15 kilowatts. You’re looking at just one AI server taking up all that power at a minimum. It’s an amazing-
Dion Hinchcliffe: Better double check those Halon fire control systems that…
Keith Townsend: Yeah, you’re definitely going to put them to test. And then, we also saw the drive storage rates. Solidigm debuting last week their 122 terabyte SSD. I got to hold it. They would not let me keep it no matter how much I asked, they just would not.
Camberley Bates: You said it was $15,000 for that thing.
Keith Townsend: Yeah, it was 15, $20,000. And what I’m told by some of the array vendors, that people are lining up for these things. You can get 2.2 petabytes of storage in two U’s of data center rack space. This is an amazing pace of innovation that’s been driven by the thirst for AI storage and processing.
Camberley Bates: Huge amount of data storage companies there. Everything from just your typical file system companies to parallel file systems. I had a chance to talk to Sam Werner from IBM, and we were talking about GPFS, also known as Scale now. And how it’s just, the numbers on there are doing terrific. And then VDURA, which is Panasas, relaunched with their new name. You had Pure Storage there with their Blade. And while it’s not a parallel file system, they’re definitely rolling in. And then Hammerspace, you had their announcement with Tier 0 capability, which is what they’re doing is enabling the storage that’s in the servers, and enabling that to be the storage and be the feeding of the GPUs, and then right out to the network storage that’s attached to those environments. The numbers that came out from Pure Storage benchmark were very, very substantial.
Keith Townsend: Yeah, your GPUs can be as fast as you want them to be, but if you can’t get IO to them, it really doesn’t matter. Dion, I heard you went to a small conference here in Chicago. Every time there’s a major tech conference in Chicago, I don’t get to go to it. But Microsoft Ignite. Or did you go, or were you remote?
Dion Hinchcliffe: No, I was there. I didn’t want to miss this one because this was really the big announcements that Microsoft’s to make around the hot topic in AI, which is agents. Unlike LLMs, which produce content for you, agents take action for you using generative AI. They can actually talk to a system using APIs to carry out tasks. And boy, Microsoft had a lot of news. Its most basic, they announced Copilot actions, and that allows anyone to automate pretty much any task they have with simple fill in the blank prompts. They announced agents for SharePoint. Which, of course they did. I’m not sure that people were lining up for that to begin with, but they had to do that because that’s still one of their biggest platforms. But they announced a new employee self-service agent, a language interpreter that operates live during calls. And those were nice, but what was really interesting was the infrastructure announcements around agents that IT departments will really care about.
Most notably the Copilot control system. And it’s a control plane designed for IT to consistently and declaratively drive business value out of Copilot agents, and dictates how they’re situated in front of users, what they can and cannot do. It gives you all the knobs to control agents across the enterprise. I think most notably was their data protection news around agents. They will provide the guarantee of intelligent grounding on enterprise data while respecting any underlying permissions and controls that are in place, so that people can’t make requests of agents to do things with data under the covers that that user maybe doesn’t have access to. And then it ensures that what the agent does is done accurately, that’s the grounding piece. And so that you don’t have agents generating new data under the covers and then putting it back into your IT systems and it’s not right.
These are the new risks that you have by unleashing AI to directly interface with your IT systems, they’re going to consume data and generate new data, and you have to make sure that it’s not going to corrupt your systems and put hallucinations in your database, that’s a concern. They announced data protection around that. I really liked that as well as a slew of management controls around how Copilots and what agents can and cannot do in your organization.
Keith Townsend: Yeah, this is penetrating the third wall a little bit. We talked to our CIO and CTO cohort about this very topic. Not just Microsoft Copilot, but specifically about agents and safe AI. This is one of those subtopics within safe AI. And one of the considerations that these forward-thinking CIOs and CTOs were considering is where to put that business logic. Do we trust that with a Microsoft, a ServiceNow or a SAP, or do we build it ourselves? That was a really interesting conversation debate. So speed to value versus this desire to not be locked into a proprietary business process, and for a third party company to own such a critical part of your capabilities.
Camberley Bates: Wow, I wish I’d been there. I’m going, okay, I love supercomputing, but wow.
Dion Hinchcliffe: These are the topics on the front line. And IT has to deliver on all this because there is voracious demand for AI, even though it seems to have plateaued with knowledge workers. But we’re going to see the business wants to put AI into everything to reduce cost, increase productivity, future ready organizations. And so, it’s really exciting times. And we look at the whole stack from NVIDIA at the bottom and Microsoft at the top. We live in exciting times, folks.
Keith Townsend: It is exciting times. We’ll continue to digest all of the information that we’re finding. You can find more on futurumgroup.com, you can follow all of our musings there. As well as some housekeeping, we will not record an episode the week of Thanksgiving. But don’t worry, we’ll make up for it, because AWS reInvent is that same weekend, and we will come back with plenty of discussion around AI infrastructure and why all of this matters. For my co-host, Camberley Bates and Dion Hinchcliffe, have a wonderful holiday break and we’ll talk to you soon.
Author Information
Camberley brings over 25 years of executive experience leading sales and marketing teams at Fortune 500 firms. Before joining The Futurum Group, she led the Evaluator Group, an information technology analyst firm as Managing Director.
Her career has spanned all elements of sales and marketing including a 360-degree view of addressing challenges and delivering solutions was achieved from crossing the boundary of sales and channel engagement with large enterprise vendors and her own 100-person IT services firm.
Camberley has provided Global 250 startups with go-to-market strategies, creating a new market category “MAID” as Vice President of Marketing at COPAN and led a worldwide marketing team including channels as a VP at VERITAS. At GE Access, a $2B distribution company, she served as VP of a new division and succeeded in growing the company from $14 to $500 million and built a successful 100-person IT services firm. Camberley began her career at IBM in sales and management.
She holds a Bachelor of Science in International Business from California State University – Long Beach and executive certificates from Wellesley and Wharton School of Business.
Keith Townsend is a technology management consultant with more than 20 years of related experience in designing, implementing, and managing data center technologies. His areas of expertise include virtualization, networking, and storage solutions for Fortune 500 organizations. He holds a BA in computing and an MS in information technology from DePaul University. He is the President of the CTO Advisor, part of The Futurum Group.
Dion Hinchcliffe is a distinguished thought leader, IT expert, and enterprise architect, celebrated for his strategic advisory with Fortune 500 and Global 2000 companies. With over 25 years of experience, Dion works with the leadership teams of top enterprises, as well as leading tech companies, in bridging the gap between business and technology, focusing on enterprise AI, IT management, cloud computing, and digital business. He is a sought-after keynote speaker, industry analyst, and author, known for his insightful and in-depth contributions to digital strategy, IT topics, and digital transformation. Dion’s influence is particularly notable in the CIO community, where he engages actively with CIO roundtables and has been ranked numerous times as one of the top global influencers of Chief Information Officers. He also serves as an executive fellow at the SDA Bocconi Center for Digital Strategies.
