Max Clark: [00:00] Where do you see like the biggest misconception or the biggest pricing gaps for people that are like now on prem and you know, because they still exist? Yeah. Thinking about going to the cloud, right? And then and then what is the cloud actually buying them and and how does that how does that price out?
Mac McClenathan: [00:14] I’m gonna give two answers. Twenty twenty-five and twenty twenty-six are very different stories. Very different stories. So
Max Clark: [00:33] So there’s a there’s a thing that I see, right, which is there’s there’s very little new in tech, right, to your point. It just becomes this continuum, you know, and and if like start the start of my career, people were phasing out of AS four hundred terminals, right? And so now it’s really funny ’cause we’re back at a terminal. And a lot of marketing around VMware. There’s a lot of other things that we see in tech with a lot of marketing, a lot of push. What I find, you know, what you you talk about it is like there’s like the the provider messaging of like this is a thing, you should focus on it. And then there’s the customer of like, I don’t want to make any decisions. And a lot of them just kick the can down the road. And so we saw like two distinct cycles of the can being kicked down the road. So it’s like my first reaction to that is it’s like, are the chickens finally coming home to roost almost, right? Like to use that phrasing of, you know, people kick the can as far as they could to defer decisions. And how much are we just seeing, I don’t wanna say like forced decisions, but it’s like people just abdicating the choice and now like things are just happening as a result.
Mac McClenathan: [01:36] Yeah. Yes. I I think like when in in two thousand twenty three Broadcom made this massive push to renew their base in whatever way they possibly could. That could have been a five year renewal on vSphere standard, you know, for you know, continued support of what they have that’s existing. In twenty twenty four when it ticked over, it was largely VCF or V V F. And they still s tried to push for one years. Early on they kind of capitulated and signed one years and then that kind of slowly degraded and went away and now it’s pretty much five years or nothing. Right. So that evolution has been kind of interesting to watch. But what I think has taken over in twenty twenty six since the beginning of the year has been the the hardware, I would say supply chain issues, cost and availability has overtaken Broadcom buzzword by a lot. Right. So VMware’s still a piece. And what we were kind of chatting about for the most part and the partner and customer community was are there multiple things happening at the same time? Is there a refresh coming uh in the next six to twelve months? When’s your Broadcom renewal? Those two were the ones that if you could pair them together, there was actually probably an opportunity for a cloud provider. And then we started to see some colo folks um, I would say, realize that economic economics of the twenty twenty build model, which don’t build, just take up space in somebody else’s data center and call it an expansion. Um and the economics kinda collapsed on that. So then you start seeing data centers shut down or like, hey, we don’t own this lease and I’m gonna back out of this footprint. And so we started seeing customers coming to infrastructure ’cause they’re getting sixty days, you know, notice to say, hey, I need you out of my facility as fast as possible. Either because I’m turning down something that I spun up in twenty twenty that doesn’t work financially anymore, or Um, I need to make space for a bigger customer who wants your space. Right. So it’s retail cola that was affected more than anything else.
Max Clark: [03:32] Right. The economics of AI neo clouds coming in are very different.
Mac McClenathan: [03:36] yeah. Yeah. So there’s that. And then there’s you know, when you can combine those, you know, for us that that’s a great opportun you know, opportunity to finally expose the the the cloud option where many of those customers would never have even considered us in the past. Um so it’s it’s moving maybe more up market than it has been in the last several years and decisions are being made faster because of, you know, you got converging forces.
Max Clark: [04:01] The the original like um alternate VMware like focus, right? We saw um it was like it was usually generated around the hardware, right? Hyperconverged infrastructure. And then there were reference designs and you know targets of like go out and buy this server with this infrastructure in it and this this became it. What I’ve seen, I think, more of is uh how would I put this? Um Maybe like an un a an a lack of awareness of how you’re actually using the virtualization platform in the first place. Right. Like like what VMware is and what vSphere is and VCS, you know, and v Cloud Director and like the functionality and the tooling available into it versus just saying, hey, you know, I need to virtualize a bunch of servers and now I’ve got them virtualized, but maybe not using everything or thinking that you’re u using everything. And it it feels almost like I mean, so Broadcom. I mean, everybody’s aware of it. They’ve made it very public. We want less partners. We want, you know, a a to change our our channel or distribution model pretty significantly. But it feels like also that that movement is away from the smaller customer, you know, and and even like at the smaller min market, away from that customer and more focused on the bigger customers. And it didn’t really feel for a while that Broadcom had a strategy around what happens to that smaller mid-market or like let’s call it the SMB, you know, size customer. And were they trying to push that to a service provider? Or was it just we’re not interested in that size anymore at all because it’s just not econom it it doesn’t return enough for us to be interested.
Mac McClenathan: [05:39] I mean, it’s a fair statement. If you look at the revenue splits, you know, none of it was super public, um, and available, but for you know, all available sources, you’ve got a ridiculously high amount of revenue coming through their top ten thousand customers. And they had four hundred thousand. So the small side is not producing enough to you know, look when you build a support organization, it made a lot of sense. from From a business perspective in my mind, when you when you explain it that way and you look at the the actual math, maybe this pushing this to a service provider actually makes a lot of sense. And with us, what’s what’s kind of funny and something I’ve been battling back in just market messaging is there’s so much noise about alternatives. You know, everybody’s mad and they want to leave Broadcom. But most of them aren’t. And the small customers they kind of peeled off early, the ones that were gonna go. But the rest, like recognizing like a model like ours, I don’t have a minimum. And so you get technical resellers that are in the mix trying to say I I got up, this is kind of funny. Someone that I would think would know better, right? It’s a large bar. Large bar.
Max Clark: [06:45] It’s a very political way of saying it, I love it.
Mac McClenathan: [06:50] It frustrated me to s to no end ’cause I’m like, gosh, I’ve been doing this for fifteen years. Yeah. And some of this stuff I’m like, I I maybe I should just be fired because people still just don’t know. that this exists in this form, right? The email that came in was I need two VMs hosted on Hyper V for Sage. thinking about this like okay. I don’t know why they called me. One, guess I don’t do anything with Hyper V. Um, two, it’s like, what is the connection with Sage? Like, why do you need Hyper-V for Sage? And that was the question back. It was like, hey man, I I don’t really have an option for Hyper-V, but just out of curiosity, why do you want Hyper-V just for Sage? Like is Sage telling you this is a new thing. Yes. And and he was like, No, I just want to avoid the seventy two core minimum with Broadcom. How many of these opportunities have we lost as a service provider? Because people think that, you know, the seventy two core minimum and all the headlines about all these things about bundling and vSAN and all the things that they may or may not have even purchased in the past and they feel like they have to buy it. With us, it’s kind of irrelevant. I’m simply selling a pool. So um we were able to unwind that and he’s like, didn’t know. That’s awesome. OPS, you know, you know, can you give me a price on OS licenses?
Max Clark: [08:14] Dang it. uh
Mac McClenathan: [08:17] So
Max Clark: [08:18] This is the thing, the basic stuff is hard. Right? But that w I mean, so this is what the funny motion is, right? Is because everybody there’s the whole like you gotta do something about VMware, right? Which becomes like this like driving pressure. And then and then what’s funny for me is is like, well, do you really have to do something about it or not? And how many people just make a a again, a default decision is just like we’re not gonna do anything about it? You know, like, you know, we renewed. And and it’s funny watching it from like the you know, let’s say the buyer side of the table, right, which is what we do, you know, like def decisions get deferred long enough and then, you know, the CFO might you know is not gonna be happy about signing the paperwork, but you’re like, what do we do? We’ve kicked we we can’t there’s no option for us anymore. And, you know, there there is a certain amount of migration that we see, you know, away from VMware onto Nutanix, you know, I don’t think anybody’s really migrating into Hyper V. Um You know, there’s a bunch of providers out there, you know, pushing the different open source solutions, which, you know, we run them internally, no hate, right? But but that’s not like that’s not why you buy one of these platforms. You’re getting this platform because you want a lot of other stuff that this platform offers to you. And and that’s you know, that like takes me back to the like how many people are buying a platform not realizing what the platform actually does for them, and then doesn’t know what all the stuff actually entails, and then are like, we just need to virtualize some servers and go put it somewhere.
Mac McClenathan: [09:43] Seventy five percent of se like by the numbers, seventy five percent of um VMware customers, at least this is what was reported and it makes sense to me and I’ve validated it through a couple different sources, but only bought V So that’s the vast majority
Max Clark: [09:57] Right. eh
Mac McClenathan: [09:59] of Broadcom’s base. And so as they I mean and then that’s for the bigger, you know, the increases weren’t necessarily like Broadcom raised their prices on everything so extremely. It was more we were just buying a more inclusive bundle now. And you may actually have to look at your ecosystem and retool some stuff and maybe dump some of the third party stuff. But at the end of the day, I mean those large price increases were not because VMware increased the price on one skew. It’s you’re buying eight skews bundled as opposed to the one
Max Clark: [10:27] I mean and they did have like a I mean I mean shoot, when w what was it? It was like a five thousand dollar three server deal, right? You could get three servers, three nodes on vSphere for five K and it like, Well, of course we’re just gonna go buy this for yeah, done, right? So so, you know, it’s like you’re like, Okay, how many SKUs are actually running this? You know, our SKUs, how many people are actually running this and and and you’re like, Okay, you know, like V Motion Really cool technology, right? How many people actually have ever used it ever in the history of their infrastructure? You’re like, okay, we maybe did it once. You know, like, cool, it worked, you know. And off off we go to the races. Um it’s you know, so I you know, going back to what you were saying earlier, it becomes this whole thing where it’s like I I I deal with this a lot, which is like the I don’t wanna say it’s like the abdication of of decision right inside of an organization. It’s scary to make a decision, no matter where you are inside of inside of the hierarchy of the org. So a lot of people just don’t want to make decisions. And buyer committees get into a thing where it’s like you get you know, it’s like with each person you add to a buyer committee, it’s just one more person that’s just gonna say no or wanna defer. You know, what’s what’s the harmless answer? It’s like, we need to do more research, we need to talk to more people, we need to add more questions to the RFP and like all it’s really doing is just abdicating to the to renewing the default, right? And in those scenarios, you know, company is gonna get to the end of the chain, and now the end of the chain is we have a licensing issue and we have a hardware issue. And now what do we do?
Mac McClenathan: [11:56] It’s the stack. I call it the pain stack. I’ve
Max Clark: [11:58] The paint stack, okay.
Mac McClenathan: [11:59] I I’ve got four main contributing factors for every single conversation that I’m involved in today. Okay. Like net new opportunities. VMware licensing was definitely the talk of the town, twenty four, twenty five. Twenty six, it is hardware jumped it in level of importance. So number of opportunities coming to us for hey, we are open to new alternatives because hardware cost is so m high and it’s maybe not gonna get here on time. Then it goes VMware, then it goes colour and then there’s kind of like a subcategory out here around the the cyber recovery side of the house. So one one thing that we’ve actually tracked since twenty sixteen was I would say uh in twenty sixteen, cyber recovery wasn’t really talked about a whole lot. But as an organization with like six thousand customers globally that have some form of backup and DR associated with them. We started noticing at least an uptick enough to be interesting in twenty sixteen around like, you know, reasons why people would fail over to secondary infrastructure. Two thousand eighteen, it got to the point where like, okay, we should write a framework around this and actually define the difference between the two because there are some pretty significant differences. In fact, you and I talked about this in in a previous episode or a podcast. Um twenty twenty, we literally had to wrap a product around it and call it something else because disaster recovery and cyber recovery, two very different things. Right. But by twenty twenty five 65% of all failovers to our secondary infrastructure were cyber related. That is that is internal reporting, which is bananas to me because now you you you see all these organizations who historically have always purchased tooling um and built programs around fire, flood, natural disaster, human error. So now your your tool sets gonna matter a little bit more. And you got like your rubrics and cohesity of the world that definitely beat all the legacy players to The CISO, right? They’re pitching themselves as more of a security product than even a backup product. Yep.
Max Clark: [14:01] Immutable backups became the big, big buzzword. Everybody’s like, okay. And and then the thing for me is every time that happens, you’re like, what does it even mean? You know, like
Mac McClenathan: [14:08] Well yeah, immutability and air gapped and all the buzzwords start to to play again and then how those fit in an organization. You can really screw up immutability. I mean it can cost you a lot of money if you lock something down that doesn’t need to be locked down forever and now you can’t delete it without deleting everything. That’s actually a problem. So engaging engaging a partner. We don’t have any internal stories about that at all. Um maybe like everyone. But uh
Max Clark: [14:30] I laugh because of the pain. Like it’s just you can’t you can’t do anything except laugh. I mean you cross a certain line and you’re just like, Yeah, okay.
Mac McClenathan: [14:39] uh three sixty five backups, mail. Locking that down. And now you’ve got a compliance issue because this this is the most recent one that I was like, man, this is just a pickle. I mean there’s nothing I mean you set the policy, it was kinda, you know, customer managed and they had just basically said, I want everything immutable forever in three sixty five. Turns out they had signed contracts with a vendor that when they separate and the vendor or the the customer cancels, then they have to delete all the data associated with that customer. And now they have to d effectively blow away their entire tenant of all three sixty five backups for everything because of that one customer in a contract they signed. So all that governance, you know, that chain of command really comes comes back to bite you. B and then the in the the the direct quote from the customer on the call as well, you know, damned if you do, damned if you don’t we embraced immutability and now we’re wishing we hadn’t. Um but I
Max Clark: [15:36] I mean, you know, we we we used to joke about like layer eight issues. I still joke about layer eight issues as a network engineer, right? And this is just this is it. This is w this is like the real stuff.
Mac McClenathan: [15:48] Right. Well the the other part of that, and I got off on a tangent because immutability is there’s so many great stories. yeah, about that. But the the secondary infrastructure part. So we talk about sixty five percent failing over to secondary infrastructure. The the thing that we’ve watched people try to adopt in the last several years, but it’s getting more serious is around like clean room. So if you ki if you if you don’t buy everything twice, a lot of organizations that are experimenting with clean room, which I’ve heard is like you know, up in the eighty percentile in in a certain market segment, so mid market enterprise, but like six percent have it deployed holistically throughout their entire environment. And it’s largely experimental and it’s for maybe a subset of applications. And usually it’s like some network segmentation on infrastructure that’s on prem. So if you’ve ever gone through an event and you’ve ever dealt with d digital forensics, you know that those guys are the first thing they’re gonna do is going to come and lock up that local infrastructure. Even if you could recover into it, they won’t let you. So what are we paying for on the secondary side? You know, does that immutability and error gapping and all that stuff even pay off if it’s not in a secondary environment? And then on-demand compute is a big piece of that. So again, who has access to on-demand compute right now? It’s your public clouds. And then you know, service providers like us who have literally built services around cyber recovery for that clean room recovery. you know, if I wanna build multiple versions of my environment over here, in a lot of cases if you’re trying to do that DIY right now, there’s no way at maths. So those services are becoming a little bit more valuable because the recognition of the cyber difference.
Max Clark: [17:26] Okay. Um Boy, let’s see here. How how how do I want to phrase this question?
Mac McClenathan: [17:34] Ha ha.
Max Clark: [17:38] My experience has been there is a line between people that have had an event and the people that haven’t had the event yet. Right? It’s not like it’s not it’s not if it’s one right and then what does it look like and how painful is it? And that line really separates the people that are investing in protecting against the you know, an event and the people that are just, You know, like you hear all the phrase, we got it covered, we’re not a target, it’s not that important to us. Like you know. And and it’s it’s I I’ve I’ve become a student of this psychology, you know, over the years, but it’s it’s really true, right? Until until it happens to you or until it happens to your neighbor, you know, it’s something like intimately connected to you that you can actually see it from start to finish and understand it. And like I don’t wanna ha I mean I I refer to it as scar tissue, right? Until there’s enough collective scar tissue, there’s still this like, it’s not that important kind of kind of feedback. But there is a big difference between backup, disaster recovery, business continuity, you know, cyber cyber event re you know, recovery. They overlap but but they are different. And and the trick of course is they’re all it’s all expensive. I mean it’s you know, like expensive is a relative term, but like you’re talking about spending money on something that if you haven’t experienced yet, you’re spending money on with this like, why are we spending money on it attitude?
Mac McClenathan: [19:11] em Right.
Max Clark: [19:13] In some cases you get forced to spend the money. You know, there is a customer requirement that says we will not do business with you if you don’t have X, Y, and Z. And then they’re like, okay, here’s revenue that requires expense to like go spend the money and and you know, re recognize the revenue. There’s, you know, compliance mandates, which is directly connected to revenue. You have to have this compliance in order to be in business or, you know, have these customers. But then there’s like the rest of it, which is just like you should have a backup. And I think people in inherently understand they should back up their stuff, but then they don’t actually understand what that means or entails or what they’re doing it for. Do we test it? Do we create a program around it? And the challenge that I see a lot with these organizations, even even the larger ones, is until they’ve lost something, they don’t understand it. Mm-hmm. How do we do a better job of helping them Because it’s not like FUD. You can’t like tell them like here’s the stat. I can’t tell you, you know, like X percent of companies that have a cyber event go out of business. Nobody cares. You know, like it doesn’t associate.
Mac McClenathan: [20:15] I think one common misconception too with something like immutability is that it’s a new line item so it will cost more. That actually isn’t always the case. It can be. And you can, like like I mentioned, you can really screw up uh immutable policy. And it can cost you a ton of money if it’s not really thought through all that well. Same conversation with AI, right? If you don’t have control or at least visibility or organize or organized data, it makes things harder. So maybe that’s phase one. Um what is this you know, critical asset. Like what what data should be locked down, which shouldn’t, and what should the actual um, you know, retention period actually be. Those kind of exercises we we ran into. The the first time it kind of opened my eyes to this was uh we had a uh it was actually a DR customer. So they were sending replicas to us, but they weren’t sending their backups to they were doing that in-house. They the whole nature of the business was image capture. So they’re capturing images just
Max Clark: [21:14] Okay.
Mac McClenathan: [21:15] millions probably in on a daily basis. So that the data volume grew. We did um we started with an assessment with them because they called us and said, Hey, the government just said I can no longer contract with them if we don’t have immutability in place. jee.
Max Clark: [21:31] Okay.
Mac McClenathan: [21:32] And they’re like, okay, like for everything? And they’re like we whatever. And so they went out and got hardware quotes. And they basically spec this out. They did some math on the backup tool and said the backup tool says I need this amount of storage to accommodate this amount of backups and I have to make them all immutable. So we’re off to the races. Ended up just being some ungodly amount of money. And what the assessment really ended up yielding was one, let’s go look at what are the actual requirements. What data actually has to be immutable to be in compliance with this regulation? That’s step one. Two was for how long. And then when we Did all that math, I mean, it was about a million and half dollar difference. Total cost of ownership over five years just on resizing. So I mean, whether they whether they do it with us or whether they go buy the gear and just do it in a which we we what they ended up doing, they actually went and bought it themselves. They bought the gear. It’s not a great story for a cloud provider. It’s like, yeah, we’d love to be able to deliver the managed service. But the the assessment basically proved like, here’s how you would do it. And if you go with your plan. That hardware’s a lot more expensive. But with our plan, you buy lesser expensive hardware in in a smaller volume. That was the the result.
Max Clark: [22:43] It’s all on site and you deal with other issues then at that point. let’s let’s segue into into three sixty-five for heartbeat. Sure. I was gonna do that later, but I’ll come I’ll come back to it and then we’ll we’ll we’re gonna skip all the way around. I told you it was gonna go off the rails. Just how long does it take? Totally I I feel like I should be making t-shirts at this point, which is delete is a valid cloud operation. And and it’s like you know, it’s like if I had a nickel every time I had to explain to somebody By using Microsoft 365 or Google Workspace or fill in the blank cloud provider. Because it I mean it’s this there’s the there’s still this idea of like, it’s safe and it’s protected and it’s backed up, and you’re like, eh, is it? You know? Like what what what do you think is happening here and what’s your actual needs? Because if somebody goes through and says delete star and they have permissions to delete star, the system’s gonna delete star, and unless you have some sort of backup and resiliency against that. You know, we had a a client and they were using a, you know, what’s called like a file replication cloud provider. And this happened to them. Somebody deleted the entire thing. And it was just a fluke of luck that the cloud provider had given them and had was had rolled out a feature of um versioning and had just put it on their account as like a demo trial deal. Like somebody had accidentally enabled versioning. Which then saved the company because when they deleted everything, they actually had versioning enabled and they were able to go back and be like, hey, let’s recover the previous version. But it’s not, you know, that it it the the scenario, the confluence of events that gave them that recovery is so improbable that it was like you you guys like
Mac McClenathan: [24:32] Just
Max Clark: [24:34] like like go buy lottery tickets right now, right? Kind of thing. But this but that’s not the common outcome. common outcome is people find out that they lose something and then they have to deal with it. So at what you know saying you know, going back to the same point, you earlier point, which is like, are people losing mail data and SharePoint data and OneDrive data and then going, we should be backing this up? Or, you know, or or are is the industry doing a good job of teaching people like go back up Microsoft 365 and Google Workspace at this point?
Mac McClenathan: [25:05] Slowly but surely. I think I mean we we see it some, but you’re w I mean, we’ve been having this conversation for seven, eight years, maybe longer. Yeah. And three sixty five. And we go back to the old graphs of, you know, this is how long Microsoft does it, this is what legal hold actually means. You know, you’re kind of going down going down the list. And like what happens if somebody leaves the company and you get sued and that, you know, the tenant and the records are deleted as, you know, that’s automated action, you know, when they exit the business. You know, there’s a lot of stuff to think through. And it’s some of the different the the players like decision owners or or I guess the influencers in the decision sometimes are even an HR um that we might find more valuable than the guy on IT. You know, if someone’s looking at storage cost, they’re gonna be more, you know, inclined to just pressing delete versus, you know, I need to keep this for a business reason. Comes down to data.
Max Clark: [25:59] Well so okay, policy, policy and and and allocation of cost, right? So um a lot of companies still it’s an IT budget, right? But having an HR policy that says when a person leaves the company, we’re gonna hold their their mail for X period of time, right? Really what you’re talking about is you would assume you know, there there is first off there’s there’s a cutoff, right, to when you know a litigation could start, but then there’s like an effective window of when they’re gonna have an idea that’s gonna occur, right? Um that’s not an IT like IT didn’t decide that policy. Is is the better approach here educating companies on how to actually do like intradepartmental billings of being like, you know, HR policy just required us to store you know, store this and so yeah, we’re pay paying for it, right? But it it’s not us.
Mac McClenathan: [26:53] Certainly an advisor value. I mean depending on who the conversation starts with, may dictate who all gets involved. So there’s a limited amount of control in that area. But I mean it’s certainly worth bringing up. And we have enough stories fortunately at this point where we can say, hey, when someone didn’t do this, this was the outcome. Um it’s kind of the benefit of being around for twenty years and having some maturity in the actual deliverable.
Max Clark: [27:22] I mean, I think HR is actually like the best friend for an IT team internally and they don’t realize it, right? Because because what does HR want? HR wants the ability to onboard and offboard efficiently, right? And when they want to do it self-government, they want to do it themselves, right? So what does that mean? we have an HRS platform that now needs to integrate with, you know, an automation tooling, right? Which then needs to integrate with this, which so it’s like if you look at it from an IT team, you could you could really run down the list and say everything that you want. you can realign back to an HR requirement of compliance and policy and say, I can give this to you better and faster, but we have to spend some money. And then they charge them be yeah, we want that. We need it. We need backups because we need to be able to restore, you know, s you know, store email. Or what’s the other one with email that makes me crazy? It’s like email is not a storage platform, but everybody stores has a retention policy of infinite by default on email. And and then you come across companies that have gone through lots of litigation and they have a uh a like a hard you know, pruning policy, set up retention. It’s like, no, we retain email for ninety days. And you’re like, Well, why do you do that? And it’s like, you know
Mac McClenathan: [28:25] We don’t want proof. Okay.
Max Clark: [28:27] ah But I mean the same thing, right? Like until you’ve gone through a um any sort of e discovery hold, like you just don’t even understand what that means. Like it’s interesting.
Mac McClenathan: [28:38] There’s no doubt about it.
Max Clark: [28:41] Um let’s hop let’s hop back to VMware for a second. Actually it’s not gonna be a second. I lied.
Mac McClenathan: [28:45] Uh
Max Clark: [28:48] So n so VMware’s done a consolidation both on SKUs, licensing, gr you know, I don’t want to say like increase the cost. I there’s been price increases, but a lot of that as as you pointed out, is just how you buy it and what you can and cannot buy. Um, they’ve also, you know, narrowed the service provider world significantly in this and we’re still seeing a c I mean, there’s there’s another date looming here for us, which is probably gonna have another impact of like Who can sell and host and manage VMware? Um is this at this point malpractice, you know, for companies, IT teams, if they’re not aggressively going out and figuring out where do you sit in the realigned ecosystem of VMware? And are we going to be in a forced migration? Or are we not going to be in a forced migration? Can we actually even reacquire licenses you know through our our our source or not? You know, like how do they make sense of this? From a customer’s perspective.
Mac McClenathan: [29:55] Malpractice. I I don’t know. I I think that this is probably a completely different take than every single one of my peers. Like completely different because I kinda get in arguments about this all the time. I there’s not gonna be anyone really, I don’t really see anybody going dark. Right. There is a looming date of the service providers who lost access to resale. They haven’t been able to sell net new for a while now. And so it’s that legacy customer base that is gonna go dark on October or I’m sorry, March, um into March of twenty seven. That company who is no longer authorized has a has a few options. One, they can choose to replatform. And move a lot of the, you know, move their customers to something like a Nutanix or a Proxmox or Hyper-V or whatever the case may be. And some of them have started down that path and maybe even hedged a little bit by buying licenses and keeping the operations alive on on VMware. so partnering with, you know, one of with me or one of my peers, um, you know, to keep to keep alive some of that stuff that uh that’s not going away. Because they still have existing contracts with all that that base. Now, if I’m if I’m a customer and I’m out of contract. Certainly, I want to control that process. And I want to go do my own evaluation because if you don’t and you renew, andor you just kind of let it like auto-renew for if you lose control of that process, in all likelihood, you’re just going to be sold. And then you lose a lot of control. So do you go dark? Probably not. Do you lose a lot of control? And does your deliverable change kind of in contract does it get sold to another operator? Most likely, right? So if you can control that process, by all means, I think that that’s worth looking at. Um, but if they’ve lost access, I mean, I’d want to know the plan. I’ve been saying this for a year or more at this point, where w what what is your plan? Is it gonna go to VME? Is that a legit platform for multi-tenancy? None of them are. That VMware, the the reason why all cloud providers were running VMware for the most part was because of the multi-tenancy. It was the only one with a mature multi-tenant option. Right. So unless your private cloud, which is a different animal completely. Um again I think that there’s value in control in that process. But if you’re under a contract, you’re honestly kind of at the mercy of whatever that company decides to do. And that might be, depending on your agreement, moving you to a new platform or selling those assets to another provider like me. Andor, and we’ve seen this um also is they decided to buy licenses from one of my peers. And so they can keep alive under that same roof. But that contract has value, so it will be sold. Nobody’s gonna let that revenue just disappear. It’s just what control do you have over the process? So uh
Max Clark: [32:40] You know, one of my favorite things to deal with a lot is, um, and I’m sure you get get this a f a little bit as well. company decides, okay, we’re gonna change. We’re in a we’re in a bad situation. We don’t you know, we the relationship is soured, y you know, what w there’s technical deficiencies, like whatever it actually is. There’s some there’s there becomes this idea of like, okay, we’re gonna make a change. Then the evaluation starts, but then usually the first question that goes along with it is, Can you give me a better deal? It doesn’t feel like there’s any opportunity for that. It’s more like we can keep you running and by the way this is your new price that you’re gonna have to deal with. That leads to like uncomfortable conversations though.
Mac McClenathan: [33:26] You’re talking about from
Max Clark: [33:28] You know, customer decides to move, right? Right. You know, either they cannot acquire the licenses that they used to have, because it’s SKU doesn’t exist anymore. Um
Mac McClenathan: [33:36] Are we talking prem or cloud provider though? Um
Max Clark: [33:39] let’s say cloud provider to cloud provider. Okay. We’ll start with that and then we can talk prem to cloud. You know, you’ve you got that first caller deal.
Mac McClenathan: [33:44] Yeah. So the question is Is there a better
Max Clark: [33:48] You get that first call in that’s usually like, hey, I need to migrate, and then by the way, can you give me a better price?
Mac McClenathan: [33:54] I mean that that’s not a that’s not a terrible conversation. I think that, you know, the the impact of Broadcom license changes out of the gate. And this isn’t stayed the same because obviously the underlying economics of hardware colo, bandwidth, power, all those things, those are incrementally increasing all the time, so my prices have to follow. But if you look at right when all the changes went into effect, we ended up dropping our compute costs. So our CPU and memory costs, we reduced after the the Broadcom change. So the common misconception was always you’ve got to be more expensive. Like we can never go to the cloud because you’re Broadcom too and you’re going to be um you know 400% more because my licensing’s 400%. None of that tracked in in my costs actually came down. So if we had the opportunity to present and just say, hey let’s uh this was the offense, right? It was listen, I don’t want to burn a bunch of cycles uselessly. I’m sure you don’t either as a as the customer, right? But if If you can give us some basic data points on the environment, I can at least benchmark this, give you a budgetary number, and then you decide, you know, after that five minute exercise, is it worth talking about more? Or do we walk away? And that’s cool because that was the biggest misconception we had to overcome early on was because you’re running VMware, you have to be more expensive, which didn’t end up being the case. Um in a lot of that has to do with with scale. So better deal. I mean, got many, many data centers all over the world all running VMware and we are all in. Like I’m literally That’s my only option. So I am optimized for VMware top to bottom. Um and in more often than not, then I could be, you know, at least competitive if not, quote unquote a better deal.
Max Clark: [35:34] The cloud the on-prem versus cloud the on prem versus cloud cost dynamic is always very interesting to like to walk through. And this is something, you know. Especially when you say at reasonable scale, it is cheaper to run and manage your own infrastructure. Right? Like you control oversubscription, your hardware cost purchasing, you know, licensing is a different animal, right? So I know you’re gonna correct me here, which is why I’m setting you up, right? But you know, but then you have all these soft costs. I mean soft costs is a bad bad term for it, right? Like the squishy the squishy human costs, right? And and I I’m s I still see a lot of people that don’t really account for like what does this actually take to run, right? Because and and a lot of it’s just that they’ve never really benchmarked it. They don’t really know. It’s like, we have an IT team that’s taking care of this for us and we don’t really associate the cost of these platforms with this you know, with our soft costs with this thing. And and there’s also the other side of it, which is, you know, if if your infrastructure is on prem for you, you know, there’s a lot of things you get away with, right? You know, like your For sure, you you’re giggy to the desktop, right? You know, you’ve got a lot of bandwidth capacity inside of your your walls. Yeah. You know, and and that trips people up a lot, especially you in the backup world. When you’re backing up, you know, and then you want to go for a recovery, you know, like people don’t think about like how long does it take to really suck down how much data do you need to suck down in your recovery window? Like, does that meet your requ you know, recovery obligations? So where do people really Where do you see like the biggest misconception or the biggest pricing gaps for people that are like now on prem and you know, because they still exist? Yeah. You know, thinking about going to the cloud, right? And then and then what is the cloud actually buying them and and how does that how does that price out?
Mac McClenathan: [37:23] I’m gonna give you two answers. Twenty twenty five and twenty twenty six. Very different stories. Very different stories. So in twenty twenty five, the world was kind of n normalizing around the new model with VMware. There was still a good amount of renewals that were coming up and that was a conversation topic. But again, like I mentioned, unless you could pair like if they had just bought infrastructure six months earlier and now they have a VMware renewal, I’ll as a cloud provider, I’ll never win that business, right? That the investment’s already there. They’re gonna do what they’re gonna do. In twenty twenty five, the the differentiation or where I started to see some light bulbs go off is one the the ability to consume what you need when you need it. So you’ve got capacity. Do I need to carry extra capacity? If so, how many? Because now we’re talking about licensed cores. Well, 2024, that resulted in about a hundred and fifteen percent increase for me in DR. And the reason is If you want to build and buy and run your own DR facility, you’ve got hardware costs, you’ve got what used to be perpetual license maintenance, but now you’re paying full boat VCF in a lot of cases for that environment. And probably you’re running in colo, right? With me, it was storage and replication licenses. So greatly simplified the units, but also in in more often than not, the the managed DR service. was less than hard cost by themselves. So that was kind of the entry point. 2024, 2025 started to tick over into really people were just looking for production uh refreshes. And when you paired them together, th I had some really fun um opportunities again with just exposing the model. Because most, especially in the mid market, just had no idea what what existed. And the ability to like we bill somewhat uniquely based off of consumed gigahertz on the processing side.
Max Clark: [39:20] That’s very unusual.
Mac McClenathan: [39:21] Yeah. So we’re looking at peak usage, um, and then memory and storage. Right. So those the main cost line items. And when we’re talking with an organization, um early in the year, I I the partner, the the I guess the homework I gave was like, Hey, you just gotta talk to your existing customers and just ask for hand raises, like who’s dealing with a broadcom renewal soon. Um and what if any increase are they looking at? And so he got a bite and he said, Hey, and g keep you in mind this this partner had not really sold a ton of infrastructure as a service in the past. So it was more like, hey man, I I work with this company. It sounds like they’re delivering good outcomes for other customers. If you’re open to you know, option four that you didn’t know existed, um, have you ever considered VMware as a uh or VMware I as is as an option? He’s like, I didn’t even know that was a thing. I thought it was build refresh on prem, status quo, go to an alternative or go to public cloud. So what I kind of coined the phrase the fourth option. Um, because it’s a little bit of a different consumption model. Right. So he started looking at the math of I can move what I need and buy what I need right now. Well, I’m also going through this procurement process or and bake off with data protection tools. Can I bring whatever I choose with me? I mean, you c you can.
Max Clark: [40:41] Do you want to?
Mac McClenathan: [40:42] But like here’s the math again, with with backup, what if I can give you a managed option? And actually it’s one of the ones he was looking at. So like I’ve got Cohesity integrated into my production platform. So, you know, high-end modern next gen backup tooling. Um, and you’re only paying for the storage it consumes, and that’s it. We don’t have to pay for colo and cross connects and upfront and license maintenance, and your team doesn’t have to know necessarily how to run that because I’m managing the jobs and you just tell them what to do, that kind of thing. So it’s just kind of light bulb moments of, well, what about the network? How are we going to access the network? this environment. So it became more about the platform in twenty twenty five, how all these bolt-ons and ecosystem actually migrates with it and become more consumable based off what they need. Twenty twenty six the math
Max Clark: [41:29] Yeah.
Mac McClenathan: [41:31] like the I the math has changed completely. I never in my career would I ever have thought I’m selling a managed service that I would beat out a DIY project on hard costs. Because the the challenge for a service provider always was timing. And the recognition of soft costs. Like do you actually you know, sure, IT teams are shrinking. They’re asked to be, you know, they’re asked to do more with less, but how much is that guy gonna give that up when that’s kind of like the main event, right? Yep, yep, yep. So over time, my let’s call it the w as AWS and Azure, you know, took down two hundred billion to start off the 2026 and the costs started to to rise. We started seeing opportunities and actual wins of you know, with customers sharing the data. We had one a couple of weeks ago that was particularly interesting because it was a it was a it was a good comparison against public cloud was involved. So it was managed Azure. There was a DIY combo with a DR provider, so it was Nutanix on-prem, DIY, and then he was going to supplement with a managed service provider for backup and DR. And then the um, you know, our infrastructure backup DR. So you got hardware on the table sixty months. So most of the time, you know, cloud contracts, thirty six months. And then, you know, but but I can get this hardware to last five years. So then I’m competing against, you know, unequal weights on depreciation timelines and all that. Now on a sixty month agreement, I’m like seventeen thousand four hundred. The Nutanix DIY plus DR option, two hundred and fifty grand more. jeez. More. And they’re earning VMware now. So then you got platform migrations. You’ve got the risk associated. You’ve got all the unknowns that you know, the whole entire ecosystem you have to rebuild. Yep. Yeah. So that one
Max Clark: [43:24] Yeah.
Mac McClenathan: [43:26] was like, oh heck no. I mean it’s not not only is it not a savings, it’ll cost me more to introduce more risk. And then you’ve got the the managed public cloud, which had no backup in DR associated with it whatsoever, because that’s a different animal altogether in public cloud. but that was thirty five grand a month. It’s almost double. What the entire solution was.
Max Clark: [43:43] shocked when they actually price this stuff out against public cloud and realize like how expensive public public cloud is. And I and you know you either see they do the work up front and then they find they’re shocked or they don’t do the work up front and they migrate and then they’re shocked. But like shock is coming with with public cloud cost. This show exists because of what we do at itbroker.com. If you’re in the middle of a real tech decision right now, new technology, vendor selection, a contract that doesn’t feel right, an MA event that just landed on your lap, and so on, we help buyers like you get it right. Independent strategy, sourcing, and contract negotiation. No kickbacks, no sales quotas, just someone in your corner. Schedule a call at itbroker.com. Back to the episode.
Mac McClenathan: [44:22] Yeah, and more often than not, it’s on the on the tail end. I I gotta go to an event. This was a legal tech conference, which I didn’t know was a thing. I got invited. That’s a different story. But I sat in the lobby with a with a partner and they just kept bringing people over and saying, I’m not entirely sure what Mac does, but he might be able to help you. So that that’s a that was a fun event. But anyways, so I get to talk to a lot of folks like rapid fire CIOs of just gigantic law firms, and out of six Fifty percent had explored and or already executed on some migration path, which actually is a little higher than the averages that I see like just publicly reported. Um, but one was using Nutanix and two of them had partially moved or one of them had partially moved to Azure and one had fully moved to Azure. And the the guy with Azure, like we start going down this, he’s like, I embraced Rubrik. I’m cohesity guy. I went to Azure, I’m a VMware guy. And we kind start laughing, like every single thing you did last year is completely contrary to my entire model and anything I do. So he’s like, Can you help me at all? Like, I don’t know, man, but it’s nice talking to you. But he he mentioned that he goes, one thing that I didn’t expect is, you know, we’ve got the cost dialed in, we’re we’re doing fin ops. I think we’ve got a pretty mature team. He goes, But I’ve had to explain more outages to my board, more downtime than I ever expected. So if you’ve got a anybody who can tell me how to to build resiliency into the public cloud, I’d actually be interested in that conversation. Like, okay, well I actually we actually have something to talk about. But that one kind of shocked me, but, you know, fifty percent the rest of were kind of in evaluation mode, looking at what do I do and here are my options. But
Max Clark: [45:58] client tell me a while back, and they were single region, single AZ US East One. So, you know, like the center of the AWS universe. And we were talking about, you know, resiliency and multi-site and multi- multi-region, all different stuff. And the argument came back that the reason why they were in a US East One was because when US East One went down, they went down, but so did the entire internet. So it was okay. Yeah. And that was like it. It was like, yeah, you know, like the whole board conversation was like, the entire internet was offline. We’re okay. And it was like it was a funny strategy of being like, yeah, yeah, yeah. We’re just, you know
Mac McClenathan: [46:36] Long as the internet breaks along with us. Yeah.
Max Clark: [46:39] You know, like you like the fifty kiloton bomb goes off, megaton bomb goes off, and it’s okay because everybody’s down too. So we don’t have we don’t have an expectation of being up. And you’re like, and you’re like, this is how you’re running your business, like this is an acceptable answer for you.
Mac McClenathan: [46:53] Um
Max Clark: [46:54] You triggered a thought for me, which was, you know, when you’re on prem, you know, an on-prem really means like you’re just running your own infrastructure, right? ’Cause like I I think some people still define on-prem as like inside of the building, but the on-prem is also their own colour, right? When when they’re on-prem, you know, you have this idea of of two things, right? Where you have your backup and then you have DR, right? So what do you do when you lose the building completely and do you have redundant infrastructure? And of course this this takes different forms. I grew you know, spent most of my life in Southern California. We were always talking about the Phantom ten point earthquake, the you know, nobody ever really invested money. But you know, if you’re in different regions of the country, you you have consistent events that you want to protect against, right? Um Hurricanes are not uncommon in in Houston, for instance, right? Or Florida, you know. Now, for an on-prem customer, if they’ve been through anything, they’re dealing with backup and they’re dealing with DR, right? So now they have to have an infrastructure play for redundant infrastructure. When you start talking about going to a cloud provider or an IaaS provider, is you know, like everything gets rebranded every couple of years. So I’m gonna try to like stay with the fresh lingo. How does that change the DR conversation for people? Right? Because now it’s like, we’re with the cloud provider. Are we pinned to a specific region? Or do we have a like expectation that if the cloud provider really lost a region, that the cloud provider is gonna resolve that outage for us somewhere else?
Mac McClenathan: [48:24] Yeah. I public cloud operates very, very different than the private cloud players. And I’ll say that terminology even though I don’t totally love it because I sell I I like to maybe draw the line in like shared infrastructure versus public cloud. But Um we operate very differently. And much more like an on-prem deployment with the tools that the customer already knows and it operates similarly. So for instance, it kind of depends on the cloud provider and the tooling and their build out and how they’re all set up. But it you know, for us, if you’re deployed in Dallas and you want to replicate to Philly, I’m running Xerto and I’m replicating those VMs up to Philly. And if you fail over it, it would be just it would be very similar to how you would work it if you were on prem to you know a secondary side.
Max Clark: [49:08] of that is driven by you and how much of that is customer driven? Which? Like A the decision to replicate, B, where to replicate. You know, like are do you have do you have companies that come to you and say, hey, you know, we want to have infrastructure in Dallas, but we don’t think we need replication or we don’t want to pay for it or we don’t want to have the secondary environment anywhere and we trust you that you’re just going to run, you know, 17 nines and we don’t have to think about this.
Mac McClenathan: [49:35] I mean, when you say driven, it would definitely be driven primarily by us. Um, I think that there’s it kind of depends on the customer, but m more often than not, and so that that use case I gave you before, so when you were we’re comparing public cloud being Azure, um Nutanix DIY and us, that was a regional healthcare organization, they probably thirteen sites if I remember correctly, running eighty four VMs. They made the decision, hey, I I can run off site backup on these eighty-four VMs, but I want to replicate for a speed for recovery for these critical systems that end up being like forty-three. Right. So there’s a little bit of flexibility there. And and that’s kind of what we advise is like what is the most critical applications that you have running today. And because of the accessibility of DR, I guess in the in the shared infrastructure model, because you’re just paying for storage and replication, I think I’ve got a better hit rate than, you know, on-prem customers saying I gotta replicate all or nothing.
Max Clark: [50:35] Okay, so you know, in the replication model, right, inside of your platform, there’s a lot of things that have to fail in order for that replication to be necessary. Right. I mean and this and this again goes back to my like deletes a valid operation thing, right? Where if you have something that hits your infrastructure and destroys data, you’re not going to a replica to recover that data because it’s probably already been replicated. Yeah. You know? So what what then becomes the cost driver, right? Because again, there’s expense of doing this to say, okay, we’re a regional healthcare provider, you know, and we want to have replica outside of our region because of XYZ reason, right? What becomes the disaster model? Also I’ll use disaster. What becomes the outage model that then drives that replication need for them.
Mac McClenathan: [51:21] Uh this last year I’ve heard a lot more about grid diversity. I mean, I think in in general, yeah, I uh sometimes it comes into me as reference to FEMA zones, um, grid diversity is is is a hot topic. Um, but again, I I we have a say and we’ll advise them based off of one, capacity, um, latency becomes a big of uh a big question mark in in DR, you know how What’s the user experience gonna be like if we end up filling over? But oftentimes it’s it’s grid grid diversity or or some sort of femizone that they’re trying to
Max Clark: [51:58] Proactively trying to protect against. Right. I I mean you’re not co-locating in like, you know, the ghetto colos of the world, right? No, no. You know. So you look at these you look at these infrastructure. I mean look, I I’ve been through data center d outages. I mean it’s I mean they’re f you know, now of course you’re like you talk about them like the the crazy events that like took down a data center.
Mac McClenathan: [52:19] I actually had a data center in Houston. I was in Cyrus One with Harvey. Which we were all sitting and watching very closely. It didn’t end up actually taking the facility down, but um it’s it was a it was a real opportunity, yeah.
Max Clark: [52:35] nail biter. But yeah but that’s the whole point. You know, like the um tier four data centers, you know, they have diesel on site, right? So, you know, you they you know you can run on diesel as long as you can get diesel to your facility, right? Like it um was it Sandy, Hurricane Sandy in New York? So Hurricane Sandy floods Lower Manhattan in New York. Where is the diesel storage tanks and the pumping infrastructure to move diesel into the, you know, up the facility, right? In the basements, all flooded. And you know, we knew data center operators that were doing bucket brigades. I mean like human people like carrying five gallon buckets of diesel up flights of stairs to get to the generator stacks to keep the generators running. Now, probably not in anybody’s DR plan prior to that, in everybody’s DR plan post that, right? Of like where does this stuff actually exist and how how does it run? Um you touched on you touched on you didn’t use the acronym R R P O R T O, but we should we should talk about R you know, we’re we’re there, so we should talk about it. You know if you ask somebody what their RTO RPO is, right? And you and you start the conversation off, they’re gonna be like instantaneous. Real time. Real time, right? Instantaneously. And then of course there’s products that deal with this. Right? That that’s when you start talking about the difference between replication and backup point time recoveries. Um but the the the the real thing that you’re talking about when you start talking about RPO and RTO is you know like cost versus time. you know, and like trying to figure out the equilibrium between wherein the cost becomes acceptable to the time for the organization. Outside of giving somebody a spreadsheet that says, you know, change the time until your cost is where you want it to be, is there a better way to make this plan?
Mac McClenathan: [54:29] I said a different a different way. You’re talking about just how to weigh
Max Clark: [54:35] Yeah, like how do you make the decision, you know, outside of just a pure I mean, some people ha look, healthcare. Yeah. Healthcare’s gonna have a different reality in terms of, you know, now everything is electronic. I hope at this point that most operators have um and test plans to go back to paper. I’ve seen enough hospitals have to go back to paper that like i i it it’s a realistic potential, right? Um but, you know, a bank, healthcare organization. I mean, there’s sensitive organizations that have real like can can actually track to much higher fidelity of what an outage would actually take and mean for them, right? Now, probably less sensitivity to cost in terms of the outcome they’re trying to protect against. But if you say you’re dealing with a uh what would be a good one to talk about? Let’s let’s make a scenario. Uh Let’s use manufacturing. Manufacturing’s a good one, right? You’re running a um automated line CNC tooling, you know, robots building, you know, doing something, right? So now you have An outage does two things to you. It’s eradicates production and the ability to actually produce the product that creates revenue. It also is going to eradicate all of your logistics handling out of that facility, right? So, you know, orders being so you so you get a double whammy with an outage, right? Because your orders now stack up and you’re also your production ca you know capacity gets crushed, and so you have to recover from both. So You could actually figure out what the cost of an outage is in that scenario and if you haven’t done the math, you can kind of like work that out pretty pretty s pretty pretty straightforward. What becomes a like risk evaluation for most people, do you think, of like the tolerance, right? And when I say like percentage wise, like, we if we think we have a realistic expect I because we’re talking statistics at some point. This is math and statistics. You have X percent likelihood of this event happening, which would then cost you Y dollars. So therefore you’ve got Z potential cost overhang on the business. This is how insurance gets gets calculated. Okay, that becomes your like watermark of like Do you immediately go out and r spend that money? You know, the Z money, or do people then say, no, we don’t want to spend Z, we want to spend Z minus fifty percent?
Mac McClenathan: [56:57] I wish there was actually an answer to that. Let’s make it right now. Every single I feel like every single conversation is completely different. Yeah. And oftentimes it’s and this is more maybe on the the smaller side, you know, let’s call it sub thousand employees. see that kind of evaluation being done as much as a compliance driver. Right. So compliance, these guys said I have to do this. Or if I’m gonna deliver services to this customer of mine, they want to, you know, show that I have a plan and that I’ve tested it because of, you know, and I can’t do business otherwise. So it’s more like I would say being in compliant having the ability to participate in like a an RFP or, you know, continue to sell to a specific kind of client, that drives DR deals, maybe more so even than you know, cost benefit analysis of if I go down, this is what it costs.
Max Clark: [57:49] I mean, you know, the exam the example there is even though the government has backed off on CMMC as a mandate, the primes are still gonna dictate it, right? So now you’ve got
Mac McClenathan: [57:57] Well cyber insurance. Yeah. Cyber insurance is is is weighing into the conversation which has popped up in several and again, you know, sub driving it.
Max Clark: [58:04] What is that driving though the the decision, do you think? I mean it pops up in the conversation, but at what point do you do this
Mac McClenathan: [58:10] It’s a specific market. You talk to rel regulated industries that are, you know, safely in that mid market category. You know, it’s a bigger driver than than most. We we had a healthcare deal uh up in Nashville, and that was one of the with the primary drivers was they had a disaster recovery as a service solution, but it had failed multiple tests, and that was the driver of hey, I am in the process of renewing my insurance and my outputs on this audit kind of suck. So, you know, what we gotta we gotta up our game here. So it was the ability to provide proofs, you know, consistency, you know, continually improving the program, that kind of thing, that won us the deal on that one.
Max Clark: [58:49] And in that world, is it the ability to to get the insurance in the first place? Or is it the cost of premium that was then dictating, like we have to do something, otherwise we’re gonna lose our insurance or we have to do something because our insurance is becoming so expensive it’s silly. Right?
Mac McClenathan: [59:03] It it’s probably a combination of both, but really it’s just the premium driver. So cyber insurance is still relatively immature in how they’re doing the math and everybody does it a little bit differently, but it’s just a risk assessment. So if you make yourself less risky, theoretically your premium’s gonna uh follow. If you show a gaping hole and say I’m failing my tests and I’m not doing what I said I did on this at at testation the first time, then they’re gonna ding you.
Max Clark: [59:27] People love to talk about testing backups, especially backup providers. Companies hate testing their backups, especially the IT teams. How much you know, y your agreement every s every good service provider in the backup space is gonna include testing as part of the agreement. Um now I’ve always had this suspicion that part of that is just a forcing function to make people actually test their backups to then validate whether the backups work or not. Because you always I mean y I I challenge anybody to to do a test restore and not find something that they were like, Oh, whoops, that didn’t work the way we thought where it was gonna work, right? Um Yeah, you know, like I I you know, from the operator standpoint, i is it is the reality as cynical as I put it off of like, no, we want you to do your first test so you find out like, whoops, you were missing all this stuff and now we can actually get into a real program. Like, is this a forcing function to like real program?
Mac McClenathan: [1:00:26] No. I mean it probably should be. Yeah. Um we d we definitely are it I can’t it kinda depends on the the product, but are you asking if as a as a provider we are encouraging backup testing just to see if we can bolt on more?
Max Clark: [1:00:42] No, not to bolt on more, but it’s like it’s the if somebody doesn’t test their backup, you don’t know what you have. I mean, that’s just the reality of it, right? Like if you haven’t tested it, you just don’t know what’s there. And pe and I and and even people that are testing recoveries, things change. Environments are not static, right? So things change and then you think you had a b you backup that was good, and you find out that your backup wasn’t good. And it it feels like almost, you know, when I’ve witnessed this and and of of you know on this side of the table with people, it’s turned into more like You know, like, yeah, everything was handled, everything was good, and then the we were we were forced to do this test that we didn’t want to do, right? Which people go into like cause it’s a lot of time, it’s energy, it’s commitment, it it’s a big distraction. And then we did it and you’re like, Oh shoot. Like like it was a good thing we did this test. Yeah. Because if this had been real, we’d be in big trouble. Which then turns into like let’s approach this slightly different, right? Let’s make changes to it. And and witnessing this a few times, like the outcome it it feels like the the ins justify the means almost. And like you want, you know, it’s not evil to say, Hey, we want you to have a good backup. Right. It’s actually a positive thing, but you have to ha understand that you have a bad backup before you inv you know, like figure out how to get to a good backup, right?
Mac McClenathan: [1:01:56] Yeah, I mean uh we have enough stories to walk into just about every single vertical to outline here’s what we found. You got new CIO comes into the business, they’re trying to evaluate what they actually have. That’s actually a pretty good place to start. We we just did one with credit union, you know, small seven-site credit union. Um we get involved initially because like we need resiliency. The power cost it was the first time I’d ever really run into a CIO that said, Hey I’m concerned about power cost in this region of the world that was going up. And I’m like, interesting. And you happen to have a hardware refresh coming on that secondary site. So I and you the economics really favor this disaster recovery conversation out out of the gate. So we get we get through the the DR piece, but then we start digging into the backups and determine two-thirds of the workload. aren’t even backing up. Like they’re just not. And this is, you know, obviously you’re you’re talking about a credit union. This is a regulated environment. And you know, people trust you with their data. And again, to to his credit, this guy comes in, he’s like, my gosh, you know, let’s reprioritize you know, put these things in order because priority one, we gotta get this things rolling to make sure that we’re protected in the in the cyber I would say the the changes in the the cyber space is is driving a lot of concern there because backup viability is so much more important than it ever has been in the past. so the ability to recover or at least get to that uh most recent version of clean data is uh big flashing lights right now.
Max Clark: [1:03:30] Um Verizon’s DBIR tracks dwell time. You know, and and it it feels like every release of it, the dwell time jumps all over the place. Right. And and well
Mac McClenathan: [1:03:42] We’ve actually seen it go down.
Max Clark: [1:03:47] Great lead, right?
Mac McClenathan: [1:03:48] So
Max Clark: [1:03:49] So the thing that’s fascinating about it is is right, we had this push up dwell time, you know, of like almost a year. And now we’ve dropped down to almost nothing.
Mac McClenathan: [1:03:58] Yeah.
Max Clark: [1:03:59] And I actually don’t know which is scarier to me. Like I’ve thought about this a lot. Like is it scarier to have a dwell time of almost a year, or is it scarier to have a dwell time of like three days? Because it’s like at a three day cycle, it means that they’re uh exfiltrating or monetizing the breach faster.
Mac McClenathan: [1:04:14] Smash and grab. Yeah.
Max Clark: [1:04:16] So is that is that you know so it’s like, but then the other side is terrifying too. So from a um from a backup, from a cyber event backup standpoint, like three days a phenomenal like dwell time, right? Because you’re like, we only have to go back a few days in order to find clean data. But the other side of it, you still have to protect for this like idea of like it is somebody on your network for six months. And and talking about, you know, organizational data shift, you know, in a week, let alone six months, like a six month look back on recovery is Terrifying, you know, like I’ve you know, so how how how do companies like how do you guys how do you what do you counsel your customers in terms of like retention and recovery now within within this data state, right? Because, you know, of course, you mutable what your what your policy is. And I mean if you’re we had a we had a client that was making um insurance flyers, right? So they had like a massive retention policy that they had to have, right? But telling somebody like you want to keep your dailies for this long and your weeklies for this long and your monthlies for this long and like what’s your actual retention policies now and how do you counsel people through this this experience?
Mac McClenathan: [1:05:25] It it actually has more to do with regulations than anything else. I mean, I can counsel them um all day, but to y to your point about just the the cost and the benefit. Most organizations in and I say we do so much more in the regulated space because they’re the buyers. Right. It’s not like I’m trying to stay away from the rest of the market, but when a guy’s like, Man, you know, that goes down, I don’t really care. It’s probably not a good customer for us.
Max Clark: [1:05:51] Yeah, you’re selling backup and recovery. People have to want to buy backup and recovery to talk to you.
Mac McClenathan: [1:05:54] Like you’re like, that’s not a critical workload. I don’t have any critical workloads. Like, okay. Well uh we’ll pass. But again, most of the business is done in in regulated spaces for that very reason. And it then it becomes what am I accountable to if you know, if the regulators come in and see X, is this gonna be a a green check or a red check? Um, that that drives a bit more than not. I think around our advocacy, it kind of depends too if it’s a Let’s call it a paid assessment. And I’ve got like real operators in the business. They’re not just talking about, you know, backup policy. It’s more business continuity as a whole. Right. So you you even mentioned like paper policy. I mean, my um, you know, kind of business continuity specialists, the the guys who actually are gonna be digging through the books and doing the interviews, they’re gonna go actually assess, you know, what’s important to the the business, what applications are the most important. If you lost this data, who would care? That that example I gave you earlier actually, um, one of the biggest contributors to um that image data that was just compiling to no end, um, ended up being completely useless. Like, after this happens, like after this execution, what happens to this image and why do you need to keep it? And they’re like, I mean, maybe we don’t. Like it has no value to the business after fourteen days. So if that’s the case, why on earth are we spending a million and a half dollars trying to back all this stuff up and make it immutable forever, right? Ha ha.
Max Clark: [1:07:33] I’m I’m I’m dealing with one right now and the consensus around the table is there is a missing comma in the regulation they have to adhere to. The way the sentence is written, you read the sentence and there is a missing comma to it, right? But because the comma is not there, you have to interpret it as written, right? And there’s there’s a there there’s there’s lots of case law that like backs this up, right? There’s a dairy farm that like sets most of this case loss honestly. And
Mac McClenathan: [1:08:08] What’s what’s the the vertical that discussions in?
Max Clark: [1:08:13] I’m trying to think how much I can disclose here because of what it is. Um let’s just say that they’re they’re highly regulated. They’re not a dairy farm. It’s not a dairy farm.
Mac McClenathan: [1:08:18] They’re not a dairy farm. Farm.
Max Clark: [1:08:22] It’s it’s not a dairy farm. They’re highly regulated. It is not a dairy farm.
Mac McClenathan: [1:08:25] Yeah.
Max Clark: [1:08:27] But but but I just happen to know it that that there without getting too deep into it, like there is there is case law that went like that comes out of a dairy farm, right? From missing comma. And so you know it’s like we know the the miss the comma is missing and there should be there. And now you have to like petition. you know, to have the law amended, right? Which like, come on. Or you have to be willing to be the one that actually goes through the judiciary to actually get, you know, it re impli you know, but but the the outcome of this missing comma and like the the cascading effect on every infrastructure decision is so severe. I mean I think it it raises costs like three X, right, for this organization. Just just because of the interpretation of this comma that we know is supposed to be there, that’s not there and like what it actually does to the infrastructure.
Mac McClenathan: [1:09:16] Yeah.
Max Clark: [1:09:17] And you’re just like, geez, you know, again, it it it should be easy, but it’s not. You know, you um we we’ve kind of flirted around this a little bit. You talked about it. I think I’m gonna maybe end here. I by the way, I had 17 pages of of questions for you and we made it into page two. uh Just just for the record. So so Mac, you’re gonna have to come back. We’re gonna do this because I got I got a lot of follow-ups here. Good you know you talk about you’re going to a conference and and talking with people that are already made decisions, right? And you know, and maybe that decision was to port you know move to Nutanix. And now you know they’ve they’ve got it maybe they they they did it before the wall, but now you’ve got a capacity increase. You’ve got a change in business. And they’ve realized something isn’t running right. They don’t want to operate their platform Anymore, right? Um, best phrase I ever heard from a CIO was we just don’t want to be in this business anymore, right? Was was the quote. And uh when you get into that, now they’ve already and they’ve made the migration, they’ve already moved, they’ve already selected other infrastructure, and now it’s not just like a lift and shift onto you, right? Like VMware’s lift and shift, like relatively straightforward-ish. You know, you do this a few times in in the history of the business, right? You’ve done this once or twice. But then you get into now a platform rehoming, how does that change the the process and the evaluation and um and uh I’ll say economics for that company? You know, is this something where you’re still finding success or if you know, has that ship sailed?
Mac McClenathan: [1:10:51] Timing matters. It’s too early. I I I could tell you, I am unaware of any Nutanix back to um VMware, right? It’s
Max Clark: [1:11:01] Yeah, it seems too early in the summer.
Mac McClenathan: [1:11:03] it’s too early. It’s for us, right? So like I have not taken down loads of Nutanix customers back to VMware based infrastructure as a service. Right. It doesn’t exist as far as I’m concerned. I have seen some hyper V comebacks. So when we have a wholesale business and the initial reaction for a couple of these MSPs that that we do business with was Well, I’m just gonna go everything to Hyper V and they get through the process and they’re like sixty sixty days. Sixty days. Okay, just kidding. I’m moving I’m moving everything back. So that that actually did happen really early in the service provider um y cycle. Um public cloud’s where I see it the most. So in the dynamic is actually pretty simple and completely not technical. If the guy that made the decision to go to the public cloud is still there, ship is sailed. Right. If the next guy’s in, We’re in business. And in the reality, the the complexity from going from VMware to public cloud and all of the associated impacts there. The problem is you got all these public cloud providers that are literally providing incentives and grant money to partners to migrate at no cost to get that Yeah, get get that environment.
Max Clark: [1:12:08] First hits free. First hits free. First hits.
Mac McClenathan: [1:12:13] Get it migrated to the public cloud and then you can refactor and do all those things. Whatever
Max Clark: [1:12:17] Yeah, yeah, yeah. We’re gonna refactor in the
Mac McClenathan: [1:12:19] happens. Especially I mean the smaller the organization, the the less likely that is gonna happen ever. Um the the first time that I really saw this just glaring was a small healthcare organization, two hundred and fifty employees, and this was last year. But the um it all started because they had one FTE that had access, like access to their firewall. And their firewall in Azure was um or or the the guy the FTE was a reservist and was deployed. geez. So this is a
Max Clark: [1:12:55] Oh jeez.
Mac McClenathan: [1:12:57] regulated industry. Couple hundred employees, healthcare space and they had one guy who had passwords or access to their firewall and he was deployed. boy. Yeah. Well that and and when they started to have the conversation it was it was more like, I guess we probably need a little bit more institutionalization. Like, I gotta have some more eyes on this. I don’t necessarily want to go hire another person. But then it’s like, Okay, what else are guys working on? and they’re like, Well, we you know, the last guy took us over here and we’re spending way too much on our Azure infrastructure. And so we start noodling around at, you know, the the detailed specs of the the VMs. Everything had basically stayed in the in current state. So it was a Agent-based backup migration backup. So we’re capturing backups, standing them up in our infrastructure. That was basically the migration path. and it was literally a 50% savings, like cut in half. And and the reason why it’s so disruptive is when you take something out of a VMware environment and lift and shift it into public cloud, all the associated always on onesie twosie gotcha metered everything that nobody’s ever measured to I’m going back to a static billing model where you pay a flat fee per month per gig of RAM per gigahertz of processing and storage. So the outcomes are flat for an organization. They don’t have to recognize metering anymore variable in billing. But you also get a second set of eyes on the environment so you least uh don’t necessarily have to go hire a new guy when he’s deployed, but uh
Max Clark: [1:14:25] I would imagine that’s probably the the number one like pitch, like slide slide number one is by the way, this is what this is gonna cost, period. Yeah. You know, like period.
Mac McClenathan: [1:14:35] Yeah.
Max Clark: [1:14:35] CFO reviewing this, like this is exactly what you’re gonna pay us into the future, you know? Like CFO’s like certainty.
Mac McClenathan: [1:14:43] Well, like I mentioned before, the math has changed. So this year the contract term lengths are expanding. There was a period of time where everything was contracting. I want a one year, I want a twenty four month, something like that. And now it’s maybe I want to have the same cost for sixty months.
Max Clark: [1:15:00] It’s beautiful. It’s you know, I’m a it’s all these I’m a tech nerd. I love technology, right? But but at the same time, I I view my role, I mean, for my entire career as like do no harm, right? So like the first thing is is like do no harm to the organization, right? Which is counter to like the shiny object, let’s go deploy it. And what I feel like so many organizations that I’ve I’ve touched There was always that element of somebody like, oh, we have to refactor our code base. this new platform came out. we have to migrate to here. Cisco sucks. We have to switch to Juniper. this blah blah blah. blah, blah, blah. And you’re like, it’s a really good resume line item. we need to migrate to the cloud, right? Like, what does my resume now say? Lifted and shifted, blah, blah, blah, blah, to the cloud, right? And and it’s it’s it it you know, it’s fascinating to be on like the almost like the like, let’s not make change side of it when we’re when I’m in the room. To then, you know, we when you look at and you bring in the dynamic of an MSP into the equation, right? Because what’s the MS there’s like this misconception of what MSPs really do, right? And part of it though is an MSP has operationalized at scale some service delivery around a piece of technology. And and the point that I make all the time to people is like you’ve got a let’s say you have an IT team of 10, which is a pretty large IT team. For most companies. I that’s that’s a lot of bodies. That MSP, if you’re dealing with a good one, has a hundred to two hundred people in that function. Who’s gonna be more efficient at delivering fill-in-the-wide function, you know, like outcome for you? And and and why does that feel competitive by default, you know, to the personality? It’s like this isn’t competitive. This is just you can’t staff a 24-7, you know, desk here. We can, we already have, we’ve done it at scale. We have a pipeline to hire people, train them, promote them, retain them, which you don’t have. And
Mac McClenathan: [1:17:06] And if you did, I would be where they wanna work anyway.
Max Clark: [1:17:12] I don’t feel like that comes up as much as it should, you know, in the evaluation cycles.
Mac McClenathan: [1:17:18] I think most of the time ’cause you’re dealing with the the one that may or may not make that decision. They have a certain specialty or like touch and feel, this, that, or the other. But yeah, it doesn’t come up. It’s the soft cost I’ve battled with for the last fifteen years until twenty twenty six.
Max Clark: [1:17:33] I have never seen a company lay people off after going to an MSP. I’ve seen people make the decision to lay people off and then go get an MSP and then complete the layoff. But I have ne but but that’s like a that’s like a a different it’s a completely different animal. Like that’s usually, you know, like almost like global outsourcing politics at play, right? Where it’s like we’re gonna shift an entire division and like but the like especially in the smaller size, in the mid market, I have never seen that happen before. So it’s I I get the fear behind it, but it’s like y you know, the the the fear is unfounded because it’s just not y you know, the company still needs you to be the expert on this platform to deal with the people now doing the work. And by the way, you get to take vacations. You know? Like this is great.
Mac McClenathan: [1:18:17] Yeah, you’re not the guy. That that actually did that did come up in the one I mentioned before where, um, you know, VMware renewal in sixty days kinda run short on the clock. We gotta get replicated and failed over to go production. They’re the ones trying to bring their backup solution that they were evaluating into the environment. Um, but that was kind of light bulb moment for that particular end user and it wasn’t manufacturing. Um, where when we deployed the managed backup, it’s like, so my guys actually don’t have to Do this anymore. I’ve got three FTEs, fifteen hundred employees and three FTEs to your point. Ten’s a big team. Right? So the mismatch was he wasn’t concerned about replacement or displacement at all. He
Max Clark: [1:19:01] No, he needed time.
Mac McClenathan: [1:19:02] that literally translated because again, it it it was kind of incremental into like recognizing what the opportunity was here. It started around VMware. We moved him to managed infrastructure, it saved him some time. Um so time to value was huge as far as the initial decision. Once we bolted on kind of the managed backup, then it was, Well, what else can I give you? And we ended up picking up an additional bit of uh patch management. So we took kind of basically all the blocking and tackling under the hood that his team again, to to your point earlier about being in the business, running infrastructure has some basic tedious stuff, um, which is really great for a a service provider like us, um, because it’s repeatable and it frees your team up for one, so they don’t have to be the guy. Um But two, they can actually do stuff that adds value to the business that’s more specialized that we wouldn’t bas basically have the people in house to do.
Max Clark: [1:19:50] All right. Mac, last question. And then you’re gonna have to promise to come back because otherwise I’m gonna have to keep you here for seven hours. Eleven eleven uh acquired eleven eleven exists through an acqu you know, a lot of acquisitions, right? My favorite like Sunguard, you know, like the whole like, we’re gonna bring a truck out, you know, and like post up for you. You know, if you didn’t go through any of those DR presentations in the early two thousands, you really missed out on life, right? Um
Mac McClenathan: [1:20:17] Right.
Max Clark: [1:20:19] But so eleven eleven is now the sum of a lot of parts. And How would you actually describe the focus of the business today? Right. Because we’ve talked about VMware and and infrastructure as a service and and you know production workload hosting infrastructure versus continuity and recovery hosting versus backup and you know and and like a replication and all these things. Like who you know, what what is how does this all fit together and what becomes the focus and what what do people know you as and what should they know you as?
Mac McClenathan: [1:20:52] Yeah, to to be honest, so I’ve lived through all of them. We I I came from a company called Green Cloud. It was the first like platform acquisition of eleven eleven. Since there’s been ten. So we’ve we’re up to ten acquisitions. Not all of them were huge. Um and and that impactful. Some of them were much more impactful. Um and I’m uh we’re only allowed to do one more, so we’re gonna end at eleven acquisitions. Dad joke for the day. But
Max Clark: [1:21:17] It’s good, I got it.
Mac McClenathan: [1:21:19] We’re gonna take it to eleven. Wanna go to spinal tap route? Yeah, yeah.
Max Clark: [1:21:24] Yeah.
Mac McClenathan: [1:21:26] no, I mean uh when you when you combine that many organizations, there is a period of complexity that’s really hard to describe. So live living through every single one of those from twenty twenty one on, um, it’s been nice and it it really and I would say back to early twenty twenty five to have a standard. So my my story is simpler today than it has been in the last five years and it actually continues to work that way. I’m simply cloud and network are the two core focuses of the organization. Cloud can encompass backup DR infrastructure, everything it takes to run that underlying platform and allow organizations to to run at the application layer. Um and then connectivity is access to the application, right? We’ve partnered with AWS even to streamline. connectivity and provide better data points and visibility on network because I know. I know. It’s great. This is the the the cliffhanger, uh for the for the next
Max Clark: [1:22:25] I do want to talk about that. It was on that was like two more pages deep into here.
Mac McClenathan: [1:22:28] But but truly, I mean, I I I mean I’ve been in in the in the cloud business in some form for twenty years um and and always had some association with network, but it’s it’s really the the blend. If if you have AWS recognizes the same issue, it’s why we’re in partnership with them. They didn’t really necessarily want to go through the process and become regulated a, you know, telecom provider, but they have enormous amount of network assets out there. Right. What they don’t have is insight and visibility to every last mile of their customers. So when someone calls and says, Hey, my application’s running slow, they probably don’t want to do it, but they’re like, Hey man, you gotta call your ISP and they call their ISP and it’s like, For sure that’s AWS. So that’s kinda how that I mean, I totally resonate, you know, having those conversations even with the AWS folks. But um you know, as a cloud provider, uh if if I can’t see it and I don’t have any control over that path, it’s a challenge for me to provide a good experience because there’s a missing link. So what we’re trying to do is bring those together. And we’re doing that through somewhat of a I I like to call it a visual bridge, mostly so I don’t have to say single pane of glass. But uh but it but it really is kind of that bridge and that my cloud infrastructure, I’m gonna build a server, recover a backup over here, and I also can see all my network metrics and statistics over here. So it does it’s a nice merge but
Max Clark: [1:23:45] So I mean, are people th is your go to market and what people should be associating with you as a backup and recovery company still, or is it shifted and are you more of a cloud infrastructure company that has backup and recovery as part of the service? Right? That’s that’s the
Mac McClenathan: [1:24:00] Yeah, th so that’s a debate. Uh some of that’s um some of that’s marketing. But
Max Clark: [1:24:05] It’s all marketing. Come on.
Mac McClenathan: [1:24:06] at the end of the day, like by revenue, production infrastructure is a service is where most of our revenue comes from.
Max Clark: [1:24:13] A new kind of
Mac McClenathan: [1:24:13] Right? Which one did I which one did I no Production infrastructure. It wasn’t production revenue.
Max Clark: [1:24:21] Production it, but even still P P I as
Mac McClenathan: [1:24:25] I’m just d well actually so I say it that way because you say and that has backup and DR. Disaster covers the same thing. It’s the same infrastructure that’s running production. Right. It’s just I’m selling that more more frequently because more organizations wanted to own and touch and feel their own gear, right? Right. So it it really is the same stuff and I think that’s where it gets lost a lot of times is we actually got put and this drove me nuts when we first started putting companies together, was we were the Veeam guys. We were the Zerdo guys. We were the DR guys. I’m like it’s a I mean, that replica’s going to production infrastructure. It is the exact same stuff. The difference is a tool in planning, right? Um, and ultimately networking. But um so all that to say is our primary re revenue source or income stream comes from infrastructure as a service. Um, DR probably is a close second. We’ve got a lot of backup business, but that’s a smaller biller obviously because More it’s one SKU, right? Yeah. Um, but then the the network piece is a really growing element. And I’m I’ve been actually surprised at the the bi-directional cross-pollination, right? Because every time that you’re selling a circuit, someone asks for a 10 gig, you know, hey, I need a a 10 gig point-to-point. Great. What’s on the other end? Like what’s the purpose? It’s replication. I’m immediately connecting the dots with some sort of infrastructure over here. Um and then again, I get to show. These are this is how it connects visually in that visual bridge. Can you stamp that trademark ah button? But on the infrastructure side, DR for whatever reason drives a little bit more network than infrastructure. Because if you fail over, how are you going to access this environment? And immediately we’re talking about that edge appliance and where that goes.
Max Clark: [1:26:12] There’s one company that still touts its ten gig private network. And every time I see the presentation, I’m like, bro, we’re selling eight hundred gig links. Yeah, just just say private network at this point. It’s not a flex.
Mac McClenathan: [1:26:23] Yeah, like ten gigs. It’s not gonna do it anymore. Right.
Max Clark: [1:26:26] Mac, thank you very much for coming in. And I’m serious when I say like I have a lot more for you, so we’ll have to do this. Thank you very much.
Mac McClenathan: [1:26:31] Sweet. I’ll watch y’all.
