By Charles King, Pund-IT, Inc. May 27, 2015
EMC announced that it has entered into a definitive agreement to purchase privately-held Virtustream for approximately $1.2B in cash. When the transaction closes, Virtustream will form the company’s new managed cloud services business.
According to EMC, the acquisition represents a transformational element in its strategy to help customers move all applications to cloud-based IT environments. Additionally, the company believes the addition of Virtustream will allow it to offer the industry’s most comprehensive hybrid cloud portfolio, one capable of supporting all enterprise applications and workloads and all cloud models.
EMC currently offers the Federation Enterprise Hybrid Cloud Solution — an on-premises private cloud solution “on-ramp” to public cloud services like VMware vCloud Air. Virtustream differs from and complements this with managed cloud software and services capabilities — both on and off premises – and will eventually be incorporated into the Federation Enterprise Hybrid Cloud Solution.
In essence, Virtustream will enable EMC’s global customers to move their entire application portfolio into trusted, dependable, secure hybrid cloud environments.
Virtustream’s cloud software and Infrastructure-as-a-Service portfolio will be delivered directly to customers and through EMC partners. EMC Federation service provider partners will receive access to Virtustream’s xStream cloud management software platform, and can use it to adopt and deliver their own branded services.
EMC expands and extends its hybrid cloud strategy and solution portfolio by acquiring Virtustream.
For nearly a decade, cloud computing has represented a visionary extension of traditional IT concepts while promising to considerably expand the benefits of computing investments. But visionary concepts are seldom, if ever, all-seeing. Time, circumstance and market evolution tend to quash finely-held views, as do individual cases of color-blindness and myopia. Innovative vendors succeed by staying closely attuned to and careful of external shifts and internal misassumptions.
In the case of cloud, uptake by enterprise customers has been more complex than many assumed. While early proponents once suggested that businesses of every kind, including large global enterprises, would eventually throw off the burdensome shackles of their on-premises IT infrastructures, data and applications to embrace the blissful ease of public cloud solutions, the actual response of enterprises was more along the lines of, “Not in this lifetime.”
Why not? For a couple of reasons.
First, businesses tend to be highly protective of the data and applications they create. In most cases, the likelihood that companies would willingly entrust those precious assets to easily-accessible public clouds is about the same as protective parents happily welcoming a prospective son-in-law whose style preferences run toward motorcycle leathers and demonic tattoos.
In addition, businesses, especially large ones, expect hosted IT services to be provided their way, in tune with their own development and management processes, following their own compliance and governance requirements. In other words, while enterprises definitely want to enjoy the benefits of cloud, they want to do it on their own terms.
As a result, there have been continuing developments across numerous cloud-related sectors and a host of standalone solutions and markets, including cloud-hosted managed services, software-as-a-service (SaaS), platform-as-a-service (PaaS) and Infrastructure-as-a-service (IaaS).
Where does Virtustream fit in all this? The company is quite comfortable in a number of complex IaaS and managed services scenarios. Plus, with Vitustream data centers located in the U.S. and Europe, and via partnerships in Asia, Africa and South America, it can provide its services globally.
The company’s founders have high levels of expertise in VMware and SAP applications (in fact, SAP America invested directly in Virtustream in 2013), and its cloud offerings are aimed primarily at production and mission critical applications, like Microsoft’s, Oracle’s and SAP’s ERP suites. Virtustream’s consulting services organization works closely with customers, often with a goal of automating the deployment and management of complex legacy applications and workloads, including SAP.
Why would EMC pursue an acquisition of this kind and size? For both strategic and commercial reasons. In the first case, hybrid cloud is central to most of the company’s markets and long-term business goals. The EMC Federation certainly provides numerous hybrid cloud offerings, ranging from VMware’s vCloud Air to VCE Vblock solutions specifically tailored for cloud-bound service providers.
But Virtustream’s expertise in developing and deploying hybrid cloud solutions for enterprise-grade, mission critical applications should substantially deepen EMC’s portfolio. That’s especially important for close company partners, including SAP, which has a particular interest in Virtustream. But it’s also a critical point in understanding how EMC intends to use the deal to pursue commercial opportunities. I
In short, Virtustream’s efforts to date, its marketplace success and the company’s growing portfolio of templated, replicable automated solutions will make it a natural topic in sales discussions with customers who are exploring or already committed to a future in the hybrid cloud, along with EMC service provider partners looking for ways to differentiate their cloud offerings.
Overall, EMC’s acquisition of Virtustream is likely to be good for both companies and their respective customers and partners. Virtustream will certainly help broaden EMC’s hybrid cloud portfolio, but it’s also hard to think of a vendor more deeply committed or attuned to hybrid cloud than EMC.
That was likely an important consideration in Virtustream’s decision to move ahead with the deal, but it is a point that innovative, young companies should ponder closely as they consider the best way to succeed in increasingly complex, competitive cloud markets. We expect the subject will also cross the minds of EMC’s competitors as they attempt to determine how to address and contend with EMC’s new managed cloud services business.
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