EMC solves its hybrid cloud puzzle with $1.2 billion Virtustream acquisition

Storage giant EMC said it will acquire venture-backed cloud software vendor Virtustream for $1.2 billion in cash. “With the addition of Virtustream, EMC completes the industry’s most comprehensive hybrid cloud portfolio to support all applications, all workloads and all cloud models,” the company said in a statement. Virtustream will form EMC’s new managed cloud services business. In terms of the deal, EMC will bundle Virtustream in with its ‘Federation Enterprise Hybrid Cloud Solution’ – an on-premise private cloud offering that provides on-ramps to public cloud services such as VMware vCloud Air. [caption id=“attachment_2012221” align=“alignleft” width=“380”]  Representative image[/caption] Virtustream brings to the EMC portfolio a managed cloud software and services capability — whether on or off premise — which EMC also intends to incorporate into the Federation Enterprise Hybrid Cloud Solution. With the addition of Virtustream, EMC will enable customers to move their entire application portfolio into a cloud environment. Virtustream’s cloud software and Infrastructure-as-a-Service portfolio will be delivered directly to customers and through partners. EMC Federation service provider partners will receive access to Virtustream’s xStream cloud management software platform and be enabled to adopt and deliver their own branded services based upon it. Founded in 2009, Virtustream is trusted by enterprises worldwide to migrate, run and manage mission-critical applications in the cloud, including SAP. Virtustream delivers application lifecycle automation and orchestration with a particular focus on I/O-intensive mission-critical enterprise applications such as SAP S/4HANA and others. In terms of customers, Virtustream has got an impressive list of clients, including The Coca-Cola Company, Heinz, Hess Corporation, Kawasaki, Lexmark, among others. Virtustream CEO Rodney Rogers will report to Joe Tucci, EMC Chairman and CEO. “Virtustream is an exceptional company and this is a critical and transformative acquisition for EMC in one of the industry’s fastest-growing and most important sectors,” said Joe Tucci. “With Virtustream in place, EMC will be uniquely positioned as a single source for our customers’ entire hybrid cloud infrastructure and services needs. We could not be more delighted that Virtustream will be joining the EMC Federation family. It’s a game changer.” SAP led a $40 million round in Virtustream in 2013. Intel Capital was also one of the most prominent investors in the company. Forrester ranked Virtustream as one of only two “Leaders” in the hosted private cloud solutions market, while Gartner has recognized Virtustream in the Gartner Magic Quadrant for Cloud Infrastructure as a Service — one of the few independent companies to reach this status worldwide in public cloud IaaS. “Historically hardware-centric, EMC has struggled to evolve its brand perception during the rapid industry transition to “as a Service” IT delivery. About 80% of the cloud revenue that EMC generated in 2014 came from the sale of hardware and software components to help customers build clouds. However, we expect EMC to remain a product-centric vendor; EMC will remain focused on helping customers migrate to, build and manage clouds as opposed to aggressively shifting its portfolio to favor cloud services,”  said Krista Macomber, analyst, Technology Business Research (TBR). “Though the acquisition of Virtustream does bring EMC into a new market, managing cloud services, it is also adjacent to its existing portfolio and strengths. It is a play that increases the potential cross-selling and solution delivery for EMC and is not only a newly acquired stream of revenue for the company,” Macomber added. “The Virtustream acquisition is risky due to its scale and divergence from core EMC technology delivery models; however, EMC has a long-standing track record of successful acquisition integration that will help it successfully monetize the purchase. Virtustream will run as a separate EMC Federation business, which will provide flexibility and focus to capitalize on cloud managed services opportunities previously not part of the EMC portfolio of services, but delivered through partnerships with cloud service providers.”