On this episode of The Six Five – On the Road, hosts Daniel Newman and Patrick Moorhead welcome Rob Bearden, CEO of Cloudera.
Their discussion covers:
- The cloud migration of Cloudera’s customer base and the growth they have experienced
- Cloudera’s data platform’s high visibility and strong analytics provided for complex data sets
- How Cloudera’s data fabric supplies companies with a cost-effective, consolidated view
- Cloudera’s grasp on the competitive hybrid multi-cloud market, and how they see the future competition
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You can listen to the conversation here:
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Patrick Moorhead: Hi. We are live in Miami, Florida at Cloudera’s sales kickoff for fiscal year 2024. We’re not here on the beach. I haven’t seen the beach. I’ve seen the beach from the window, but Dan, what great weather this is to be sitting inside.
Daniel Newman: Yeah, it’s amazing, Pat. Six Five live at the SKO here for Cloudera. It’s a little different for us. A lot of times we go to the events that are a little bit more outward, but every so often getting to get inside behind the scenes and see what’s going on inside the company is really great. Some good energy. And yes Pat, some good weather too.
Patrick Moorhead: Yeah, totally. And I think this is our first sales kickoff. It’s pretty awesome. But without further ado, Rob, how you doing?
Rob Bearden: Hey, we really appreciate y’all being here. We’re excited. We’ve got a lot of energy around SKO this year. Some great product releases have just come out. A lot of good customer successes, so it’s a really good time.
Patrick Moorhead: Yeah, it was great. Your party last night that we attended. You know, my first job was carrying a bag. That was over 30 years ago. You can sense the excitement when something is new and out there. Not only did I talk to some of your sales and geo leaders, but also to some of your partners too and they’re really excited too.
Rob Bearden: It’s a great time at Cloudera right now. We’re excited. We’ve got momentum behind us right now. We’re finally feeling some tailwinds, some great customer wins, some really big customer successes. So now we got to build on that momentum as we’ve started up this new year.
Daniel Newman: We should talk about that here because some of the words I heard walking around the lawn here at the Fontainebleau, nice hotel by the way, in Miami was product fit. A lot of people talking about feeling like the product’s more ready than it’s been in a long time, which for salespeople, that’s like a love language. You’re not selling anymore what might work, you’re saying like we are ready to go. And also I just saw a lot of smiling and dancing. I think I actually saw people out dancing, which it’s always an indication of a good strong culture. But Rob, you being the CEO/president of Cloudera, it’s been a big year. Talk a little bit about how the business and the technology is moving along for the company.
Rob Bearden: Yeah, well, I would summarize it as we now have tailwinds and momentum. When we wrapped up the year in January, we had migrated, at that point, 71% of the customer base from Legacy Hortonworks Cloudera platforms on the CDP. More importantly, we’ve got 86% of our ARR is on CDP. And if we fast-forward to this year, by the end of this year, we think we’ll have about 96% to 98% of our revenue tagged to CDP and probably 92% to 93% of our entire customer base over to CDP. So really strong adoption of the product. What we’re also seeing is great net expansion rates. So what that really states is, once they use CDP, they expand their use cases, they expand the number of applications they have, and we’re starting to see even a bigger movement now to the public tier.
So they usually come across to the private cloud and then they expand onto the public. And we’re seeing that motion really accelerate right now and that’s a great signal. On the other side of the trade from the growth on the revenue side, what we’ve done is we’ve really focused on unit economics and gotten very focused on our EBITDA contribution. And when we look at the unit economics from an EBITDA and a growth standpoint on a pro forma basis, on a rule of 40, we achieved 49. So really great execution by the team, not only on the revenue side, but also on the profitability and the operations side of the business.
Patrick Moorhead: Yeah, that’s phenomenal to see. And you know Rob, nothing goes quickly in enterprise IT, especially when you’re dealing with such important data. Data that’s literally driving the bottom line for them. Or if you’re a government entity, some huge research that you’re doing or some big breakthrough that you’re working on. So nobody wants to take big risks and the great news is that sends a clear message that the platform is ready and people are adopting. I mean, 98% people on it, it is astonishing. It really is astonishing. It also makes sense to me that customers would want to get in that private cloud model first before they expand it to hybrid cloud bursting or however they chop up their applications and data.
We are in a unique time right now. I mean, it seemed like the tech industry was blowing and going forever in an environment of 0% interest rates, it seemed like. We could probably debate whether we’re in a recession or not, but there’s definitely a downturn out there. I’m curious, Rob, salespeople got their pitches and the product people made their cases, but what are you offering specifically with high intent to help your customers get through some of these tougher times where they might be asked to either reduce their budgets or do more with the same?
Rob Bearden: If you look at our customer base, we’re very focused on the Fortune 2000 and the upper end of that. If you look at the top 10 industries, we have anywhere from eight to nine or even 10 of the top 10, and each one of those 10 as customers. And our customers use our platform to manage mission-critical use cases. Bet the business kind of applications. And they tend to be very structured data sets that require a lot of governance, high security disciplines. And so as our customers have pressure points on their business, they get very, very focused on what are the unit economics around their business. So as they unpack the unit economics, they need analytics to do that and they need to be able to have visibility to all their data in a consolidated view. Our platform and our tooling gives them that ability very easily. And as they rationalize their cost, what we’re seeing is actually a lot of repatriation from the cloud applications that have just become either they’ve grown to a point to where architecturally and/or financially they’re just not pragmatic to run there. It can be more cost effectively run. And now that CDP is enterprise ready with our 7.1 and 7.8 releases, they can be assured they can move any level of workload to our platform and get the best TCO of any platform management in the industry.
Patrick Moorhead: That’s awesome.
Daniel Newman: Yeah, it’s really interesting. I’ve been talking for, feels like a year, because while this is the year we’re finally kind of talking about austerity and we’re talking about, really all of ’22 was pretty brutal for tech. That was when all the market basically said, we’re taking off our chips. All the chips are coming out. And despite the fact that companies were growing and actually showing decent earnings, now it’s kind of like the chickens are coming home to roost. But deflationary technology, Rob, is actually I think where companies are going to spend. Our collective friend, Arvind Krishna, CEO of IBM, you know, he came out last year and I think he said in an interview with us that IT would be the most protected line item in a recessionary period, and we’re hearing that more and more. So it isn’t about all tech spending is down. It’s about spending on technology that can’t be justified. So what I’m hearing you basically saying is the hybrid ecosystem that enables to connect all the on-prem data to all the public cloud data, to enable companies to get visibility into their businesses, their supply chains, their operations, their systems, this is where companies actually almost need to double down. Which should be a really great opportunity for Cloudera to accelerate growth, almost play that deflationary role.
Rob Bearden: It is, and what the customers want is we don’t want to have duplicate spend. We don’t want to have to have an integration tax where we’re having to move data multiple times, create multiple layers of data, multiple copies of data, move it to multiple databases and be able to aggregate applications. We give them that consolidated view with our data fabric irrespective of where the data is. And nine out of ten times, we’re the most cost-effective place to run that data, access that data, and drive analytics through that data.
Patrick Moorhead: That’s great stuff. Rob, as analysts, we like to leave ourselves escape valves if we’re wrong. So sometimes we don’t use definitives. But I think, Dan, we both definitively said that Cloudera is the only game in town for hybrid multi-cloud related to data.
Rob Bearden: And I think that’s the key related to data.
Patrick Moorhead: Exactly. There’s a lot of talk and there’s also a lot of other types of hybrid multi-cloud meshes, like applications. You can go in with Kubernetes and manage across all these different environments, but you’re the only game in town right now. So first off, I wonder, okay, why isn’t there more competition right now? How do you see this playing? Is it a hard thing to do? Is it easy to copy? Do you have a moat that’s being formed?
Rob Bearden: Well, it’s hard. If you actually rewind in time to the early 1.0 days of Hadoop and Hortonworks and Cloudera, we’ve been at this 12, 14 years collectively on building the engines and the security models and the governance engines that allow us to be able to operate data at scale. And the core strategies behind both companies’ technologies were we do it in open source, and so we get the tailwinds of a community helping us do this in the highest best innovation models. But we also did it in a way where we had to be interoperable at every level of the infrastructure stack, whether it be at the server, whether it be the cloud, you mentioned Kubernetes of course. And so design principles going back 10 years were all structured around interoperability of moving data across multiple tiers and doing it in a very secure, highly governed way in leveraging and embracing the kind of technologies like Kubernetes that ultimately have allowed us to separate storage and compute and run independent on any of those hybrid cloud native data services.
And so customers view us as the best way to get to the cloud for the applications, the data and the use cases that are most pragmatic to run there, and they don’t have to sacrifice anything to do that. But they get the interoperability to move that to either another cloud, or bring it back to their data center on a private cloud if that use case and data set grows to a point it’s architecturally and financially more pragmatic to do so.
Patrick Moorhead: Yeah, it’s interesting. I hadn’t even thought about architecturally based on open source how, it doesn’t guarantee interoperability, but it makes it a heck of a lot higher probability. And then you’re fire testing, you’re putting all of the enterprise-grade control security around it to actually make real enterprises, who aren’t necessarily hyperscalers, make that happen. But then again, interoperability with public clouds, because public clouds are fundamentally start on open source, so it’s almost like you have an architectural built-in advantage here. You can’t just snap your fingers and say, hey, I do some data, and let’s say I’m only doing it as a SaaS play. I’m going to make this, we’re going to go on-prem too. Or, if I’m on-prem and I haven’t built everything on open source, magically going into the public cloud is difficult.
Rob Bearden: It is. And then there’s another layer of complexity with, what if I have applications and data sets across multiple clouds and or multiple data centers.
Patrick Moorhead: Which, by the way, is very much the reality.
Rob Bearden: It is reality.
Patrick Moorhead: I don’t know. I haven’t talked to a Fortune 500 company that that’s not the scenario.
Rob Bearden: Well, it’s just reality of how the world works today. And you ask about MO. One is the architecture of our private and public cloud. The next is the data fabric of how we move data from a replication standpoint, how we embrace snapshotting and time travel around that. And then we wrap the security and governance model. But more importantly, the secret sauce is really in the multi-tenant control plane and our ability to give control back to the enterprise user on how and where they want that data distributed and how they move that data around. And the real power behind our platforms is actually in the control plane.
Daniel Newman: And I think it’s interesting because when we say things like the only, and like you said, we always have escape valves, but governance, compliance, security, there are a lot of companies making proclamations about being able to handle data for hybrid and multi. And like you said, there’s kind of different layers of the cake of where that’s happening, whether that’s in actually how applications are being moved around. But those are the parts and pieces that really are, I don’t want to say they’re table stakes in a way that doesn’t give you a lot of credit for creating it, but then when a company says we do hybrid multi, and if they’re not handling sovereignty, compliance, governance, security, inherently, then it’s not really truly addressing hybrid multi.
Rob Bearden: And bidirectional replication is really key in that as well. But the ability to monitor it through a control plane and a single view across any region globally, that’s where the complexity of managing it really comes into play. And that’s where we shine.
Patrick Moorhead: By the way, every big enterprise is doing multi-cloud and they’re doing it and it’s ugly in the fact that they have separate teams for every cloud provider. Separate teams to do the data, to do the security, to do the operations, and do the applications, which is completely inefficient. And that’s where this set of hybrid multi-cloud fabrics, data being one of them, means you have one way to do, in this case, data across AWS, GCP, Azure, on-prem and others.
Rob Bearden: And one other thing, across any region globally. Because when you move from one region to another on a cloud, you have a lot of complexity. When you have to have multiple regions on multiple clouds, the problem compounds exponentially. We extract that complexity through our control point management.
Daniel Newman: Right, exactly. I mentioned sovereignty and the complexities of geographically distributed data. It’s massive. These are not things that you can be like, oh, well we don’t quite do that, yet we’re still hybrid multi. Well, you’re not. Like you said, any global enterprise it has… it’s like, yeah, but you don’t really solve our problems. So this is where you are uniquely set to solve the problem. So as the CEO/president of Cloudera, you know, I don’t get to hear your quarterly earnings anymore, so now I’m going to hit you up on a little bit of a bigger future question, which I think you’re allowed to answer now. What are you excited about, Rob, over the next three to five years in this particular space and how that might help Cloudera reach its next scale to growth?
Rob Bearden: Well, the last couple to three years, and really dug in hard last year ending in January, we were very focused on moving our customer base over to CDP, the new platform, getting those customers successful, getting them growing again. And then making sure on the other side of the trade that we were really focused on profitability, driving EBITDA and free cash flow. The team’s done a great job executing on that. We’re at the top tier, if you look at all public software companies, we’re in the 95 percentile of EBITDA generation. Now, if I look forward into this year and next, it’s back to growth now. We’re going to have a pull market. Now that we’ve got such a large percentage, especially of our big customers on CDP, we’re seeing those workloads grow fast.
Daniel Newman: Did you say we’re going to have a Bull market?
Rob Bearden: No, a pull market.
Daniel Newman: Oh, a pull market. I was like, whoa. I was getting excited.
Rob Bearden: Yeah, I was saying more of a pull market than us pushing into it. But we’re really positioned well because our customer’s data doubles every 12 to 18 months. And so the more data under management, the more use cases go on, the more expansion happens, and that’s just going to continue to drive our growth. More importantly, we had the most successful release of our platform, 7.1, 7.8. Over two-thirds of our customers have already adopted it, put it in production. About 90% of our customers that pay us a million dollars or more have adopted it. So that’s just going to accelerate, and what it says is we’re really now ready to go out and compete for those new workloads and the customers we don’t have presence in. And we’ve seen great success. We brought a couple of hundred new customers on last year. We think we can take that to 500 new customers this year.
And then when I look out past two years and think about the three to five year and what’s happening with AI, we’re really positioned to be the net beneficiary. The ChatGPT in that world is really cool with what it does, but it’s the Wild West and it’s just doing great work with the internet of things. But there’s no corporate or governance from an enterprise standpoint on how you secure it, how you manage it, how you make sure you have proper governance. And the way the AI works, the more data that you can run and train models on, the more efficient and predictive that AI can be. And so where we control the data, AI can be more successful and then we can apply those enterprisilities over that AI, and it’s going to help our customer base adopt it and get value from it much faster.
Patrick Moorhead: I love it, Rob. Our time is up. I had so much fun, I know Daniel did, but I always learn something when we chat and I really appreciate you bringing all the insights and updates to the viewers. Like Dan had said, hey, obviously you’re not doing quarterly earnings like you used to, so we don’t hear from y’all. So it’s a real privilege to hear what’s going on at the company and where you see the company going. That 98% rate and your updates on the software is astonishing that those numbers are so high. But we appreciate that.
Rob Bearden: Well, thank you both for coming. It’s been great to have you here and look forward to seeing you soon and let’s keep these updates going.
Daniel Newman: Yeah, we’ll have you back on soon. Hey everyone, thanks so much for tuning in here. We’re at the SKO live at the Fontainebleau Miami. This is The Six Five live on the road. Patrick Moorhead, Daniel Newman. Hit that subscribe button if you like what you heard. We appreciate our audience, appreciate all you tuning in. For now we got to go though. We’ll see y’all later. Bye.
Patrick Moorhead: Take care.