Outside-In Perspective – The Six Five – On the Road

By Patrick Moorhead - April 2, 2024

On this episode of The Six Five On the Road, hosts Daniel Newman and Patrick Moorhead are at Cloudera Elevate 25 where they welcome Charles Sansbury, Chief Executive Officer at Cloudera for a conversation on Cloudera’s growth strategy, which includes hybrid cloud and AI.

Their discussion covers:

  • Cloudera’s strategy and key investments for growth
  • How Cloudera is using AI to help their customers
  • Cloudera’s plan for hybrid cloud and how are the customers reacting

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Transcript:

Patrick Moorhead: The Six Five is on the road here in Miami at Cloudera’s sales kickoff called Elevate 25. It was great being on stage today, Dan. And nothing beats the excitement of a sales kickoff, especially when it’s with an awesome company like Cloudera.

Daniel Newman: Yeah, Pat, as a couple of entrepreneurs ourselves, we appreciate nothing more than the motion of going to market, delivering value and bringing home the proverbial bacon or whatever it is y’all like to eat. But good energy this morning. I mean, look, we are at this incredible intersection of change right now, the intersection where companies are going from, we have all this data. Do we have all this data and we want to use apps, do we have all this data and we want to use Gen.ai? And by the way, it was fun to be on stage together, but it was even more fun to surprisingly invite someone to join us on stage.

Patrick Moorhead: Exactly. I introduce our guest, Charles Sansbury, CEO of Cloudera. Welcome back to The Six Five.

Charles Sansbury: Thank you guys. It’s good to be back.

Patrick Moorhead: Yes, in beautiful Miami. It’s wonderful here.

Charles Sansbury: Definitely a good place to be at this time of year.

Daniel Newman: It really is. I got out, walked a little bit this morning. Beautiful. Love the ocean. Love waking up to hear that sound. But Charles, loved having you join us up on stage. I know we caught you by surprise, but we appreciate you playing along. Oftentimes we are sort of the ones doing the question asking and now you are back in the hot seat, but it was fun to have you put us in the hot seat for a minute and make us ask questions. And for everyone out there, we’ll make sure you get a link to check out some of what we had to say. But Charles, I want to hear from you now, six months into the job, now six months ago we flew out to Palo Alto that area, went to the Cloudera offices, sat you down, you were like five minutes into the business. I mean literally.

Charles Sansbury: Maybe my second or third day.

Daniel Newman: It was really quick, and thanks for being gracious. But you had some ideas, but you were in a listening campaign, you’re on tour. Now, you’ve spent six months. Now you’ve talked to your executive team, you’ve appointed a number of new executives, you’ve talked to customers, you’ve been directed and working with the board. Where’s your strategy at from the day you came into today?

Charles Sansbury: Well, great question. And first of all, when you called me up on stage earlier and I was the question asker, maybe I’m regretting that now because I feel like the tables have turned. But that was an interesting time. When I joined the company I was excited about great customers, great markets, tailwind in terms of the market direction, and then our board is very supportive of some of the things we’re trying to do. Since that time I spent a lot of time making some changes to the team. We’ve added some really good people. I will tell you, we’ve got a bunch of job openings out there right now. We get 100 resumes for every job we open. So we’re kind of swimming against the tide in terms of big tech where a lot of people aren’t adding people. All that’s been terrific. I’ve spent a lot of time with customers. I would say where we are today. I joined because of what I thought was a very sound strategy and direction.

There have been some refinements based on facts on the ground, but the direction that was in place around focusing on hybrid infrastructure, focusing on the importance of data engineering and data management as a precursor to or as table stakes for powering your AI initiatives, all those things ring true. I think where we’ve shifted or maybe put more wood behind the arrow is around one, our focus on generative AI and really more articulating and talking about what we’ve already done with customers because we do have all these amazing use cases that customers are already making business decisions powered by AI-based technologies that we provide, and also putting more effort behind our cloud-based technologies, trying to be more cloud-centric. Because in a hybrid world, cloud is critical but not sufficient. You have to have the capabilities. So we’ve invested or begun the process to invest a bunch of money to accelerate some things, which I would say is refinement of the strategy, but definitely not a change in the strategy because the strategy’s sound.

Patrick Moorhead: So Charles, I’ve been to a lot of sales kickoffs in companies that I used to work for big tech, but also I’ve been to a lot of sales kickoffs for other technology companies in my analyst role. And typically, the end game is to get the sales force super motivated, understand the strategy, understand the new products technologies, better understand customer needs. So a lot of things in there. If you had one takeaway that you would like your salespeople to walk away with to bring to your customers, what would it be?

Charles Sansbury: We’re on the coast of Florida, Cape Canaveral’s up the way. The theme of this event is all systems go. And the analogy that I used in my presentation was the idea that when you’re lifting off a rocket, you’re applying all this force and the engines are firing and it’s not moving, it’s kind of shaking. And there’s a concept called the moment of lift when it actually starts to move. And I use that moment of lift concept to talk about all the work that’s been done from a product perspective, the marketing team developing new collateral. The product managers actually come to get up with new sales plays, and we’re applying all this force and all this pressure, and I want the sales guys to take away one, that all those folks are working for them to make them more successful. And two, I believe we’re just almost at that moment of lift.

And so I thought that was a very good analogy for where we are. And you saw today the words that happened in the room were from our customers who are already using the technology to do amazing things around using their data to improve their business decisions. I’ve talked a little bit about the idea that I also want to make sure the company understands the difference we’re making. And so the other part of this is getting the team re-energized and re-fired up again, I joined because I think there’s an amazing opportunity here based on the market. But Cloudera was here before I got here and had done some pretty cool things beforehand. It’s kind of like when you buy a really cool used car. That car’s new to you and you’re ready to go, and you’re going to mod it. But the folks who had that car for a while, they maybe don’t appreciate all the benefits of that. So part of my job is to reinforce the appreciation for all the good stuff we have. And then the goal here is to accelerate out of this event.

Patrick Moorhead: I love it.

Daniel Newman: Yeah, I often talk about it inside of my firm. We talk about kind of being a coiled spring. And there’s always that kind of moment when you talk about that friction before the lift, right? It’s kind of that moment where you feel like, oh, we’re making all this investment. It’s like is it going to pay off? And it’s nervy, but you’re doing the right thing. And I know one of the things you reiterated quite a bit on stage, and I heard a number of your executives reiterated, was that you’re investing.

Charles Sansbury: Yes.

Daniel Newman: Now the company’s gone through an ownership transformation over the past few years, a leadership transformation in a few years. I think for the people out there and your customers and your ecosystem partners, everyone wants to know, oh, are you investing? And the answer is emphatically yes. But as analysts, what we want to know is what are you investing in? You’re not a public company. I can’t look at your financial statements. So tell us what are you investing in?

Charles Sansbury: And actually, just so you know, in my presentation yesterday I showed the PNL from this past year and the PNL projection for this current year.

Daniel Newman: I heard you made your number.

Charles Sansbury: We did. And by the way, I’m the new guy, so I can’t take credit for that other than I stayed out of the way, and the team ran through the finish line. But no, we just finished a year where revenue approached $1.1 billion. We grew software revenue approaching the double digits, services business slower so total revenue growth is in the mid single digits. But the goal here is we should be growing greater than double digits just based on our market opportunity. Having said all that, every number I just told you is a record for the company. So that’s a great foundation.

But within that, when I went to the board and I said the team did a bunch of work when I joined to talk about what are the things that we should be doing more, better, faster, and came with a list of initiatives. And I went to the board, and they basically approved this year to next year an incremental nearly $100 million of investment right across a couple of key areas, primarily field, go-to-market, market awareness, and product.

And so within that from a field perspective, we’re building new capabilities around a cloud-focused sales team. We’re building capabilities around an inside team to help us access more those companies that are just a rung below our current calling base, which is really the global 2000. From a marketing perspective, we’re investing additional money in product marketing and awareness. From a products’ perspective, we’ve accelerated more than a handful of initiatives around our hybrid management capabilities, our cloud-based capabilities, accelerating what we’re doing in terms of enabling AI.

And so all of those things add up to a big number. And I wanted people to see, because my key theme was we are investing for growth to help Cloudera realize its opportunity. And those are interesting and fun words and of course I’m going to say that, but then I put up a page with a bunch of numbers on it and the circle was the change in costs. And that’s an investment. We’re taking profitability down this year, which I think points to our investors’ willingness to make long-term investments to improve the business. And I think that’s important for our people to hear. It’s also important for customers to hear because we do have a ton of innovation that we’ve done, but a ton of innovation that customers want us to do so they can grow, and we can grow with them on their data management and AI journeys.

Patrick Moorhead: I think that’s a great message and I’m hoping that we’re talking about it publicly now, but I think the more that you can get maybe some of the details out, not necessarily on the numbers, but where you’re investing and maybe some percentage increases, I think it would bode well for you and give your customers and your new customers a vote of confidence because quite frankly, we’re entering one of the biggest growth cycles that I think I’ve ever seen in my career. And that of course is generative AI. And Dan and I in our weekly podcast, we’ve talked about Cloudera as one of the most important data companies that not enough people have heard of. And I’m going to get you quoted here, “the best kept secret in data”. So first of all, to talk a little bit about that, but what is being “the best kept secret in data” and doing great at data, what does that mean to generative AI and your customers?

Charles Sansbury: Well, first of all, when I said we’re the best kept secret, that wasn’t a compliment, right? It’s a point of frustration for me, and you’ve just seen a customer presentation. I can’t talk about the customer publicly, but that’s a global company, one of the biggest companies in the world that has overlaid our technology on 30 years of data and is using that data to pull up insights and ties between different pieces of data in different geographies and different languages from different timeframes that helps them basically speed research in their core markets to develop better products faster. It’s an amazing story. If you weren’t here today…

Patrick Moorhead: It was incredible.

Charles Sansbury: I mean, it’s an amazing story.

Patrick Moorhead: Yes.

Charles Sansbury: If you weren’t here today, you wouldn’t have heard that.

Patrick Moorhead: Yes.

Charles Sansbury: And I’ve been talking to a bunch of customers, and those stories exist throughout our customer base. One of the things we’re doing from an investment perspective is actually now going out and incentivizing customers to do these case studies, talk about what they’ve done. Because although this is a new market and although we probably have more vintage in complex big data and analytics than any company in the world, more vintage, we’re still viewed as being new to the game relative to some of the other players. And so that reference capability is going to be important to us to reestablish our credibility. So we’re focusing a lot on that. I go back to, I don’t want you to be able to say we are the best kept secret going forward. But what we have to do, given all the noise in the market right now and noise function of a lot of companies are spending a lot of money in what could turn out to be a big AI hype cycle, AI on the other end is a very real technology that’s going to have incredible implications for how customers run their businesses.

Right now it’s very hard to separate the hype from the reality. And so we, I think are being very thoughtful and being very targeted in terms of these things that we’ve done for customers, abstracting them, and then broadcasting them out to our base so they can say, Cloudera is not new to this AI story, but they helped company A, company B, company C to solve these problems. We had another chart up earlier today, and it basically segmented the world’s companies by revenue. There are 100 companies in the world roughly with more than $100 billion of revenue, another couple hundred with more than $50 billion of revenue. The majority of those count Cloudera as their enterprise data platform of choice.

So in that set, we are very well known. How do we get that message out to the next thousand companies in the world? Because those companies now have data analytics, data management challenges, AI opportunities that they didn’t have two years ago. And that to me is the investing for growth that we’re doing. And so on one hand, it’s very exciting to be where we are. On the other hand, there’s a little bit of nails across the chalkboard when I hear that we’re a best kept secret. It’s true. And I’m working to change that.

Patrick Moorhead: Excellent. And part of this, by the way, part of doing this video today is getting the message out. And it’d be amazing if you could bottle up in a way that’s safe for your customers, these amazing customer stories, because it was an incredible, possibly one of the better case studies I’ve seen in a long time. So thank you.

Daniel Newman: Yeah, it’s great to be inside the walls for a moment behind the scenes and get to hear that. I think I made a joke on stage. I said there was so much content on the slides, and it was the best I’ve ever seen that done because there was so much to share. And the speaker was prolific, and it was just a great example of how the technology can really work. But I want to actually, Charles, double click on a couple of things that you said that I think are really important. One is the investment in taking down profit, as I see it is also an investment in scaling revenue, meaning you and I am guessing your board and those that are choosing to invest genuinely believe that this investment is going to take revenue up. And that’s the lift off. And I think you’re going to get there because you’re not really trying to take down profit, but you’re basically saying, if we don’t grow, we’re going to be less profitable, but we’re making bets that we’ve got to become the less kept secret and the more known, right?

Charles Sansbury: It’s interesting. So my kickoff presentation yesterday, that was the exact point. We are investing to accelerate growth. And while that will take profitability down in fiscal 2025, the target is accelerate growth in ’26 and ’27 and really kind of getting our fair share of market opportunity. Within that, I talked about kind of the three big pillars or themes of growth for 2025. The first is around making hybrid real, developing true hybrid capability for our customers. The second is around accelerating our customers AI initiatives. And the third around facilitating modern data architecture, which in our view are the three key components and the three places where if we can improve functionality, someone’s going to emerge as the leading data platform for large global companies to manage structure and deliver their big data, their AI, and whatever database initiatives come next. I believe we are best positioned to do that, but there’s still some things we have to add to the capabilities, and we’re making those investments starting now, starting three months ago.

Daniel Newman: So Pat, two years ago said that your cloud sucks. Not yours. He just told a whole audience of Cloudera people that their cloud sucks. And so that’s been one of the items that stuck with me. I think we even mentioned that up on stage, but you are making big bets because people in enterprises, clouds are complex. And clouds are not all public, which we’ve reiterated. In fact, most workloads are still on-prem. So you’ve made big bets on private, on hybrid, and on public. Talk a little bit, take us home here, a little bit on, this is not even AI, we’re talking about something else, but it’s an enabler. How is this sort of shift from being kind of the prem company to really embracing hybrid, multi, and public being addressed or being appreciated by your customers?

Charles Sansbury: Yeah, so one of our speakers earlier yesterday or today talked about how large global corporations, they’re quick to try things, they’re new to everything, and they end up with these accidental architectures was the concept. So we’ve got one of everything, and we’ve got important data stored everywhere. And so because of that, how on earth do you come into that environment and bring something new and bring some change? So based on all of that, what we’re trying to do is to recognize where that architecture exists. Increasingly, people are building capabilities in the cloud. AI started in the cloud. But what we’re seeing customers say is in a modern data architecture that’s about flexibility and optimization, and what we want to make sure is that we have the right computing platform for the workload. Some workloads should be on cloud, some should be on prem. And we’re putting in place the architecture and the technical kind of capabilities around observability and manageability so we can give our customers that flexibility.

We have a number of customers who we’ve worked with in this kind of overall reference architecture. And in our mind, one, it’s unique because we’re the only company that has these industrial strength on-premises capabilities. Secondly, although workloads will still continue to move to the cloud, our customers still mostly have mainframes, and they have them because that’s a super efficient, super secure, super effective computing platform for some workloads. And so the recognition is in that modern data architecture, you’re giving customers the choice and flexibility to match the workload to the computing platform, and we’re doing the engineering work to abstract away from some of the complexity of doing it themselves and hopefully delivering to them a set of tools and capabilities that allow them to get to that endpoint architecture faster. That’s the high-level thought behind it, and we’ve got a lot of smart people trying to figure it out. So I’m arm waving and talking the talk, but we really are making millions upon millions of dollars of investments to achieve that goal.

Daniel Newman: That’s exciting. Well, Charles, I want to thank you so much for sitting down with us both on the stage and now on The Six Five. And we do look forward to chronicling the continued evolution at Cloudera. Congratulations, kickoffs are very exciting moments, and let’s make 24 FY 25 a great year for Cloudera.

Charles Sansbury: Thank you. And I hope you guys feel the enthusiasm. There’s exciting times here at Cloudera.

Patrick Moorhead: Absolutely.

Daniel Newman: All right, everybody hit that subscribe button. Join us for all of the coverage here from SKO. It’s Elevate 25. We are in Hollywood, Florida, north of Miami, south of Fort Lauderdale. We are joined by Charles Sansbury, CEO of Cloudera on this episode. Tune in for all the others, tune in for all of our shows, but for this one time to say goodbye. See you all later.

Patrick Moorhead

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.