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EMC's Virtustream buy to set foundation for managed services business

EMC's pending acquisition of Virtustream would create a new cloud service business and opportunities for consultants, integrators and service providers

Poised as the latest move in EMC's Federation strategy, and the foundation for the vendor's new managed services business, today's announcement that EMC has entered into a definitive agreement to acquire Virtustream, a managed cloud software and services provider, has partner opportunity written all over it.

That's according to EMC chairman and CEO Joe Tucci, Howard Elias, EMC president and COO for Global Enterprise Services, and Rodney Rogers, Virtustream chairman and CEO, all of whom stated, in an online press conference, that systems integrators, IT consultants, and service providers will have a vital role to play after the $1.2 billion all cash deal closes sometime in the third quarter of 2015.

"Virtustream will be a valued resource for all members of the EMC family and our partner ecosystem," said Tucci. "In fact, our SI [system integrator] and service provider partners will receive access to the Virtustream xStream cloud management software platform which is technically integrated with VMware software," he added.

This integration will help speed up adoption of the Virtustream software by partners, enabling them to add and deliver their own branded services on top it, the EMC chairman contended.

A cloud-driven managed services business

Virtustream xStream cloud management platform was designed to enable I/O-intensive mission critical enterprise applications, such as SAP and others, on a modern multitenant, highly automated cloud architecture. EMC intends to incorporate the Virtustream xStream managed cloud software and services capability -- whether on- or off-premises -- into EMC's existing Federation Enterprise Hybrid Cloud Solution, according to the company.

Virtustream uses xStream on its own Infrastructure-as-a-Service (IaaS) platform in North America and Western Europe. The company also licenses its software to other service providers, worldwide, to operate their own IaaS offering as well as to enterprise customers.

When the EMC-Virtustream deal closes, EMC plans to embrace and expand on Virtustream's partner-orientation. "It is our intent to work the extensive partner ecosystem we have here at the Federation making all of the IP available, i.e. the software licensing, the services [intellectual property], services methodology, best practices, and the enablement capability," Elias said.

EMC also plans on offering partners joint go-to-market and enablement at the technology, field sales and marketing levels.

"We'll also ensure that our direct sales force is neutral, independent of whether we deliver that service directly or through the partner ecosystem. That will be a key tenet of our strategy," he added.

Virtustream's Rogers stated that EMC's partnering approach was important when the company considered EMC's acquisition bid, as SIs and service providers are critical to its customer base.

"Virtually all of our software revenue to date has been directed toward the SI and service provider channels," he said. Rogers stated that 40% of Virtustream's revenue comes from its cloud software, including licensing and enablement of the software, and 60% of the company's revenue comes from its cloud infrastructure business.

Avoiding partner conflict

While there's a consultative piece of business that Virtustream does directly -- related to sizing and design of the cloud environment and the on boarding of applications to that environment -- Rogers said that the company is careful not to infringe on its partners' revenue streams.

"We don't get into application integration and configuration; we believe that type of service is for our SI channels, at least as it relates to Virtustream's organic business," he said.

EMC's Elias pointed to opportunities for both EMC and partners at the cloud layer, the infrastructure layer and assessing which applications to move to the cloud and how to migrate them to the cloud. "Our partners do the application integration, business process integration and everything related to how that works in the customer environment," he said.

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