Episode 3: Of Risk and Trust… in IT

In Ray O’Farrell’s words, virtualization, or software-defined hardware, simply works, is flexible and very non-disruptive. A perfect technology for IT organizations, right? Sort of… to realize the benefits of any new technology, there has to be a fundamental level of trust between a vendor and customer that takes the fear factor out. Ray, CTO of VMware CTO, also places high value on the right culture to enable innovation.
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Actively creating business value in IT

Ray O’Farrell, Executive Vice President and Chief Technology Officer at VMware, calls virtualization one of the most non-disruptive disruptive technologies to hit the enterprise. Virtualization has allowed IT organizations to shift into a new role, the role of driving digital transformation by enabling agility and speed for the entire company. This is a big deal because the IT organization’s top goal of ‘saving money’ has evolved into one of actively creating business value. Of course, it’s not that simple. This new mindset of business value creation has to be cultivated by the leadership and must be accompanied by a cultural shift by the entire IT organization and across the entire company and, ultimately, across the industry. Listen to Ray’s practical and visionary insights that will help your business’s top line results.

Featured Luminary: Ray O’Farrell, Executive Vice President and Chief Technology Officer at VMware

Ray O’Farrell joined VMware in April 2003 and currently serves as executive vice president and chief technology officer. His main focus areas is to ensure VMware’s long term technology leadership through research and innovation programs, with the primary goal of positively impacting and shaping the future of VMware, its ecosystem and its customers. He is also responsible for ensuring VMware’s successful partnerships across the industry with a focus on the Dell Technologies family of businesses.

“The risk of taking a risk is lower than not taking a risk.”

— Ray O’Farrell, Executive Vice President and Chief Technology Officer at VMware

Luminaries Hosts

  • Mark Schaefer Author, Consultant, College Educator. Mark is a leading authority on marketing strategy, consultant, blogger, podcaster, and the author of six best-selling books, including "KNOWN." He has two advanced degrees and studied under Peter Drucker in graduate school. Some of his clients include Microsoft, GE, Johnson & Johnson and the US Air Force
  • Douglas Karr Technologist, Author, Speaker. Pre-Internet, Douglas started his career as a Naval electrician before going to work for the newspaper industry. His ability to translate business needs into technology during the advent of the Internet paved the way for his digital career. Douglas owns an Indianapolis agency, runs a MarTech publication, is a book author, and speaks internationally on digital marketing, technology, and media.


0:01 NARRATOR: Luminaries– talking to the brightest minds in tech.

0:05 MICHAEL DELL: We have always believed that if we built the right technology, we could amplify and enhance and enable human progress. And when I look at what lies ahead, I realize that we’ve really just barely begun.

0:22 NARRATOR: Your hosts are Mark Schaefer and Douglas Karr.

0:29 MARK SCHAEFER: Hello everyone, this is Mark Schaefer, and welcome to another episode of Luminaries, where we talk to the brightest minds in tech about IT and digital transformation, how it’s affecting our businesses, our companies, and our lives. And I’m here today with my co-host Doug Karr. How are you, Doug?

0:47 DOUGLAS KARR: I am doing fantastic, and so happy to be here.

0:50 MARK SCHAEFER: Oh, this is an amazing opportunity because we’re doing kind of a special live broadcast today, and we have this most amazing guest, Ray O’Farrell. And Ray, we got to spend a little bit of time with Ray about a week or so ago, and let me tell you something, Ray is just one of the most inspiring, interesting, and kind men in technology you’re going to find. Ray is the executive vice president and chief technology officer for VMware Ray, so glad to have you with us today.

1:23 RAY O’FARRELL: Very glad to be here.

1:25 DOUGLAS KARR: Well, Ray, I wanted to start off because I’m the giddy geek in the room. My career spanned basically with VMware’s, and so, first of all, just a pleasure to meet you in person. But, back in the day, you know, VMware it took over the desktop, and it really did magic. I don’t think people even imagined the fact that they could run multiple operating systems in virtualized environments on a desktop.

1:52 And then with ESX taking that to the enterprise in 2001– I mean, you guys just lit up the industry. It literally transformed IT just with that one advancement in technology. And I wanted to ask you what it was what it was like to be there on the dawn of virtualization.

2:13 RAY O’FARRELL: Well, I joined VMware a little after the Workstation product had really began to take off. Workstation’s that original product which worked on the desktops. And it was really being used by customers who were focused on either development, or testing actually was a major thing they wanted as well. You want to build an application, you want to run it on, test it on different operating systems, how easier than to just fire up VMware and fire up a bunch of different operating systems on your– typically, actually, on your laptop or your desktop PC. This was not a server story at that time.

2:47 And when I joined is when the company was really beginning to consider and open up this whole opportunity of how can we bring this technology into the enterprise. And, broadly speaking, it was originally– the narrative was very much a consolidation play. It’s sort of obvious. I have 10 servers, running 10 applications, running 10 operating systems. With VMware, I can consolidate all this onto one server with obvious savings from a CAPEX point of view.

3:16 That was the original narrative, and what really took off very quickly across the industry. Initially people began to use this, as usual, tentatively, trying out in some experimental workloads, or safe workloads. Printer servers, file servers, was a common first environment there. But then, quickly they began to use it much more business-critical applications.

3:38 MARK SCHAEFER: The thing that’s amazing to me, Ray, is how quickly this took off, and really, how radical this idea was in its day. And I think there’s some good lessons here around adoption, that technology– anything we can imagine, we can get technology to do. But in this world of transformation, sometimes getting people to do what we need them to do is the hard part. And yet, somehow this took off like wildfire. So what are some of the lessons of adoption and the role of culture in your success?

4:17 RAY O’FARRELL: So I think, when I look back at the rapid takeoff of server virtualization– Back then, the product was called ESX. And I look at how quickly that began to be used across many, many different industries and across a wide variety of workloads in IT. I think– there was really three things stand out in my mind. One of them is, it had a very strong reputation for it just works. So people will trust in it very, very quickly. And that– that give people the confidence to try it out.

4:48 The second one was, in some ways, it’s one of the most non-disruptive disruptive technologies, in that you were able to utilize this technology, but you kept the same servers, you kept the same operating systems, you kept the same applications. And so, you essentially poured the software onto your network, but most of the rest of the infrastructure– sorry, you pour it onto the infrastructure– the most of your applications and the management of them was fundamentally unaffected. You didn’t have to suddenly change how the company works. In fact, the rest of the company outside of IT didn’t really know what was going on. Just, suddenly, IT seem to be saving money. So that was one of the second, I think, big strengths there.

5:28 And I think the third one, which is more of a cultural thing, is because we had a number of people in most of our customers who quickly became enamored with this technology, and because– you know, our relationship with them and the fact it just works, they became very strong advocates for us within those organizations. So you had this situation where you’re going to customers that are already with somebody using this technology, who is as big an advocate within the organization as our sales people or as our engineers would have been. So it was a powerful impact on that as well.

6:02 MARK SCHAEFER: Wow, that’s amazing. And just because, you know, it really was reliable. And you kind of built on that culture of trust, didn’t you?

6:10 RAY O’FARRELL: Yeah. In many ways, if you think of– you know, VMware fairly proudly declares itself as an enterprise company, right? And what that really means is that you can trust your enterprise applications. You can trust your enterprise infrastructure on VMware. And we put a great deal of focus on that. You know, are we going to have bugs and problems like any other company, like any other software company? But we put– we place a great deal of emphasis on trying to make sure that, one, those things do not occur, and if they do occur, to the greatest degree possible, we’re all over it.

6:44 And in the early days, there was a lot of deep, personal relationships built up with our customers. You know, if they had a problem, we would have people on-site. We would be there on the phone trying to work them through. And that also helped– that also helps to build that trust between the customer and a vendor like VMware.

7:05 And then that pays off when so– you know, if there’s a problem later, they know you’ve come through before. They trust you’ll come through / and so you’re able to get through some of those challenges along the way.

7:14 MARK SCHAEFER: Well, you heard it here first. The chief technology officer is really the chief trust officer, isn’t it?

7:19 RAY O’FARRELL: It is. Trust is important.

7:21 DOUGLAS KARR: When we spoke to Analyst about IT transformation, I think one of the key takeaways that we got was– and it was actually surprising, was that people that rapidly adopted new technology could actually save so much money, I think it was upwards of 24%, that that could fund the innovation to transform their IT. And it seems that VMware is– that’s the living statement of what VMware did, right?

7:50 RAY O’FARRELL: Yeah. I mean, we– You know, when you look at virtualization, and I don’t mean in just the sense of VMware for compute, but this modeling of everything from a software point of view, that inherently gives a lot of flexibility, and a lot of ability to build new features and new things on top of that. Now how does an organization fund that?

8:13 If they can see the initial savings based on something like virtualization, or leveraging a better management subsystem, one, they’ve now got a little more budget to play with. But second of all, they have demonstrated the ability to leverage this new technology to do something new and innovative.

8:29 And so, what I find is almost like a building on itself here. Once you virtualize something, it opens up new possibilities. Once you convert to the software, it opens up a whole new set of possibilities in terms of management and functionality, which you could not have done individual– in the physical environment itself.

8:47 So virtualization, yeah, it allows me to consolidate onto one server. But as a side effect of that, I begin to represent the virtual machines as software. As a side effect of that, I get to build highly flexible clouds. So you begin to see all these things building upon each other.

9:01 MARK SCHAEFER: Ray, I’m going to take us a little bit of a different direction now, because one of the things I’ve been so excited to talk to you about is this idea of the innovation process. And I know this is something you’re really passionate about. To compete today, to win, it’s all about speed and really finding ways to disrupt yourself. As a CTO, how do you encourage that in your company? How do you enable a culture of change, innovation, and really, disruption?

9:37 RAY O’FARRELL: So one of the things when people ask me that question– so VMware is proud of its innovation. And, you know, we put a lot of effort into making sure that we continue to innovate, and that– in some ways, you know, there is– almost every problem that we see tends to have a technology answer. At least that’s the first view of it, right? And so we begin to jump on these things.

10:00 However, you cannot stand up at 8:00 a.m. In the morning and say, let’s innovate between noon and 2:00 today. It just doesn’t work like that. So it’s around creating a culture that allows that innovation to succeed, and a culture that– and I use the word allow, because what you’re actually doing is, you’re telling the engineering organization, or the sales organization, or whatever the organization is interfacing with the customer leveraging a piece of technology that says, you don’t necessarily need to stick to the way we always did it.

10:30 If there’s a better way, let’s get it on the surface and figure out what we can do with that. Or, if we’ve got a product that’s not working out quite right, let’s not continue to do whatever we were doing before, because we’re going to get the same result. Do we need to partner with somebody? Do we need to embrace the technology in a different way?

10:47 And to create a culture where those questions continuously can be asked, and keep– new projects are popping up or new ideas are popping up. That’s how we focus on the creation of an innovation engine. It’s not the industry plan for innovation. You plan for a culture which then generates that innovation.

11:08 And we’ve many programs across the company to try and make that happen. Simple things like, you know, we organize hackathons across the company, but we make sure that those hackathons leverage people from the sales organization. Sales engineers with development engineers with support engineers. We try and blend these things together, because you don’t know where the best idea is going to come from.

11:29 Also, if you’re an engineer focused on a particular technology problem, you need to be open to understanding what is a customer feeling? What is a customer experiencing? And it might not be about that technology. In fact, one of the things as engineers we often tend to focus is, how do I solve a problem? Sometimes you might be looking at not how to solve a problem, but how do I create a whole new opportunity? And that’s what you get by listening to a wider range, array of people coming in, from our field CTOS, or our sales engineers, and making sure there’s forums to make all of that happen.

12:03 MARK SCHAEFER: And what are the implications for you, as a leader, to enable this change? Because people tend to want to keep things the same. They want to be safe. They want stability. And you are trying to make people feel safe for disruption. So what are some of the behaviors you need to model? What are some of the implications for leadership for a self-disrupting organization?

12:32 RAY O’FARRELL: I think one of the strongest things is this sense of safety. That sounds a little bit kind of boring, whatever it is. But what that really means is that– the risk of taking a risk is lower than the risk of not taking the risk, right?

12:47 DOUGLAS KARR: Wow. Wow, that’s powerful.

12:50 RAY O’FARRELL: You need to look at what is exactly– if you stayed doing exactly the same thing, over and over again, when the rest of the world changes around you, over time you’re just going to be doomed, right? Because new technologies, new competitors, new approaches, they’re going to beat you out. So instead, what you need to do is be able to keep pushing the envelopes and discovering what you can do to advance, what you can do to be more competitive.

13:17 And all of those have a little bit of risk associated with them. A whole bunch of them will fail. And so what you need to do as a leader is make sure that the organization knows it’s OK to fail. Now that doesn’t mean you can, you know, destroy the company, or upset a whole bunch of customers. But what you need to be able to do is manage that very, very carefully. Introduce a new technology, see if it works. If it doesn’t work maybe, not the end of the world. But some of them will work. And then your ability to be able to jump on those is very, very powerful.

13:45 But it’s not even about technology. Sometimes it’s about how you support customers, how you sell, how you know communicate with customers what best practices are. It’s always the same way, which is just technology. It’s around a much broader sense of what that innovation should be.

14:05 DOUGLAS KARR: Now, obviously you can’t get into any intellectual property with this, but I am curious as we look to– when we look to the future of virtualization, what excites you? What is around the corner?

14:18 RAY O’FARRELL: Right. So, I think, quite often when we use the word virtualization, you know, people very quickly go to the virtualization of the x86 processor and virtual machines, right? But broadly speaking, when we speak of virtualization or abstraction, we use the word software-defined. So I think what we are seeing is– we use phrases like the software-defined data center, software-defined storage, software-defined networking. So rather than speaking of that as virtualization, it is the representation of this physical infrastructure in a new way in software.

14:53 And I think that is going to continue. So, you know, we’ve introduced storage virtualization. We’re working with network virtualization right now. What we saw when we first virtualized compute was, simply because you virtualized, you got this explosion of new capabilities. Because in the end, it’s all software, which is fast moving. You can experiment, you can try things out very easily. So really, we’re going to see the same in networking and storage as well. So definitely that’s one area, I will say, just more and more of this focus on software-defined everything.

15:25 And even the software-defined or the software representation of the infrastructure, you hear people sometimes use the phrase “software-defined infrastructure.” Well, that essentially means I am representing this infrastructure by a piece of software, or by a description. And now that means that the execution or implementation of the infrastructure is the execution of a program. So you can instantiate infrastructure in ways that were never realized before.

15:52 I don’t take that too far. Underneath there is real hardware, right? But you’re abstracting, and making all of this very, very flexible. So I think you’re going to see more and more of that. I think some of the other new areas– when we speak of companies being digitally transformed, what I’ve noticed is, that it means that the IT organization suddenly shifts into this different role. It is a role by where it is now front and center in terms of customer acquisition, and interface to the customer. That’s going to continue.

16:23 But now, in a world of IoT, it’s suddenly, the IT organization is not just focused on how do I run the website that interfaces to the customer, or how do I build the mobile app which interfaces to the customer? It’s how do I abstract real world information, and make real-world, often near real-time decisions around that, to offer customers or a factory or a process, you know, just to become more efficient and better in some way? I think that’s a big change for the IT organization, because now the company is becoming IT as it were. I think that’s the biggest change we think we’re going to see over the next few years.

16:58 MARK SCHAEFER: It almost sounds like the CIO role is becoming similar to the CEO role as the strategy becomes the software. The software used to enable the business, and now, in many ways the software is the business. Some of the things that we’ve heard about– companies that are in the food business, or in the medical business, they’re really technology companies that sell food, or technology companies that dispense health care, for example.

17:29 RAY O’FARRELL: Yeah, that’s exactly what we’re seeing. The CIO and the VPs of infrastructure are no longer about focusing on some, you know, back office activity around keeping the company running in the background. Instead they now are front and center. And being front and center, they’re responsible for the competitive edge that the company has. And yeah, that makes them begin to have to think like a CEO. How do I make my investments to gain a little bit more of that edge? And by the way, that equally might mean that some of the things they used to do, how do I try and save a little bit of money on making networking somewhat different, and so on? That is now a lower priority than the flexibility and the agility that something like a software-defined networking or something like a software approach brings up. So agility, speed, competitiveness, races to the top of the surface as far as the CIO is concerned.

18:23 MARK SCHAEFER: And speaking of agility and speed, another thing I saw that you said in an interview that was kind of provocative, that a company integrating with a public cloud is the fastest way to market. It’s a source of radical speed. Tell us a little bit more about that comment.

18:41 RAY O’FARRELL: So if you look at some of the small– if you look at particularly the SAS companies out there, and you meet, you talk to their VPs of infrastructure and engineers. When you say, what is most important to you, over and over again, agility and speed, they are the words that appear. And because of that– and the reason why that’s important to them is because they’re constantly in a competitive battle all the time.

19:09 And in this new world where cloud, private, public, when all this– when clouds are readily available, the building of an infrastructure now is secondary to how a competitor can suddenly pop up. They can get in there free, or near limitless access to connect to data center infrastructure by leveraging cloud assets. And so, because of that, it allows them to move very, very fast. Because the whole world has now become digitized, that speed directly relates to how they relate to their customers. So competitors can pop up very, very fast. I think that’s why it is so important in the mix.

19:48 I think that where companies hit some challenges in that is, one, if you forget that emphasis on agility and speed and how important that is, and you begin, you know, focusing on not disrupting yourself, yeah, then you could have some challenges really quickly. But focusing on that is– Focusing on speed, agility, leveraging cloud, leveraging new technology to do that is very important.

20:10 DOUGLAS KARR: Ray, one of the fascinating things to me is. When you look across Dell Technologies and each of the companies. Is that you have someone out there that’s selling storage and selling hardware, and you have VMware which is– almost the opposite, that they’re selling solutions that minimize the necessity for that hardware and software, and I– or that hardware and storage. And I think it’s fascinating that across a company you have, maybe, these two competing levels. And of course, it goes to security, it goes to everything within Dell. Can you speak a little bit to VMware and how you work together and autonomously within the organization?

20:57 RAY O’FARRELL: Yeah. First of all, it’s not always clear that you’re in this either/or situation. If you recall, earlier we spoke of what you’re selling is trust to some degree, right? And, you know, VMware and Dell, Dell EMC group of companies can sell a lot of trust. You know, EMC is obviously the trusted storage. Dell has been the trusted compute for years. VMware, trusted virtualization. And so because, of that we have many, many opportunities to work really well together. And we take advantage of them as much as we can.

21:33 So on the one side of it, there is great opportunity to take advantage of the sheer strength and heft of the company the size of Dell Technologies, to be able to deliver solutions that many other companies cannot do. They don’t have the breadth, they don’t have the scale, they don’t have the strength that is there. So we take advantage of that.

21:53 What you’re pointing– what you’re also noting, though, is that VMware is a separate, independent company. And it is a company, for many years, who has built a software platform. And by definition, a platform needs to be, you know, encompassing and broad. And so, yeah, we do work across a lot of storage, a lot of storage other than EMC. We work with a lot of compute other than Dell. We work with lots of partnerships and vendors across different clouds and security.

22:18 And, in some ways, yeah, occasionally that will cause a problem in some situation, whether it is a competitive situation between one part of Dell and with maybe a partner with VMware. But it is vitally important for us to maintain that platform story. And frankly, Dell Technologies, and EMC beforehand, has been very supportive in allowing us to do that, in saying they recognize the fact that VMware will be there sometimes, you know, competing with a partner.

22:45 But as long as that, broadly speaking were trying to solve a problem for a customer, and as long as that, broadly speaking, where we can, we are always working and doing the best together, that works out. You’ve got to balance the two different things. The strength of a platform means you’ve got to get into some of these coopetition type of situations. And that’s just something to be managed. And, you know, Dell Technologies, VMware, has been pretty good at trying to find that balance week after week, day after day.

23:15 MARK SCHAEFER: Ray, thank you so much for sharing your wisdom and your insights with us today. We’ve been speaking with Ray O’Farrell, executive vice president and chief technology officer, perhaps chief trust officer, of VMware. This is Mark Schaefer and Doug Karr for Luminaries. Thank you so much for listening. We never take you for granted. Thank you so much for tuning in, and we’ll see you next time.

23:41 NARRATOR: Luminaries– talking to the brightest minds in tech. A podcast series from Dell Technologies.