News

EMC Arms Itself with Virtustream To Challenge AWS

• By David Ramel
• 06/01/2015

Recent reports that Amazon Web Services Inc. (AWS) dwarfs its cloud computing rivals aren't keeping competitors such as EMC from expanding their portfolios to challenge the market leader.

EMC last week announced it was acquiring privately held cloud company Virtustream for $1.2 billion. While EMC's cloud business focuses on hybrid deployments, Virtustream will pave the way for its entrance into the "managed cloud" service business, a step closer to the pure public cloud Infrastructure as a Service (IaaS) offered by AWS.

Industry observers and EMC itself hinted that the acquisition will position the company to more directly challenge AWS. "The move follows EMC's quest to compete against cloud infrastructure market leader, Amazon's AWS," DC Inno said.

Financial analyst InvestCorrectly.com said the move will help EMC get a larger chunk of the IaaS segment. "Virtustream is more of a niche player than a direct rival to Amazon.com Inc.'s AWS and Microsoft Corp.'s Azure," the site said. "However, even as a niche asset, it remains to be seen how much of a game-change Virtustream could possibly be to the new owner EMC."

Indeed, Virtustream was actually listed as a leading "niche player" by analyst firm Gartner Inc. in its recent "Magic Quadrant" IaaS report that placed AWS ahead of the pack, closely chased by Microsoft.

Another former niche player, VMware Inc., moved up into the "visionary" classification in the latest Gartner report, notable because EMC has an 85 percent ownership stake in VMware. Data Center Knowledge noted that "VMware went from 'niche' to 'visionary' and increased its ability to execute." The site added, "EMC's recent acquisition of Virtustream will likely affect its position in next year's report."

EMC said the acquisition was driven by concerns of customers, more of whom wanted to put all their computing assets into the cloud, moving beyond the hybrid model. Virtustream will help the "EMC Federation" of companies -- which includes VMware -- offer that capability.

"To date we've been able to provide a robust range of hybrid cloud offerings via EMC's Federation of businesses, but increasingly we're hearing from customers that they want the option to confidently move all workloads to an off-prem managed cloud model, including their most mission-critical applications like SAP," EMC exec Howard Elias said in a blog post. "The significance of Virtustream is that it will also extend the EMC Federation's capabilities to enable us to support everything from the smallest applications to the most I/O intensive enterprise applications, whether on or off prem, as we intend to incorporate this technology into the Federation Enterprise Hybrid Cloud Solution."

The Virtustream technology to help the EMC Federation broaden its capabilities is actually based on AWS innovations, Virtustream CEO Rodney Rogers said in a blog post.

In starting the company, Rogers said, founders "admired the core cloud architecture that AWS had built which ultimately 'made' the public cloud market that they continue to dominate today. We felt attempting to build a sub-scale AWS model, however, would be venture capital suicide and instead focused on incorporating many of the principles they pioneered in the way of multi-tenancy, elasticity, orchestration, and automation toward solving the engineering problem associated specifically with running I/O-intensive, mission-critical enterprise applications (such as SAP and others) in the cloud.

"Further, we focused on automating many of the system functions required to manage these particular types of enterprise application environments so as to be able to offer a uniquely efficient managed service for the technology landscapes that ran on our cloud. Virtustream was born."

Since that birth, in addition to growing into one of the few independent companies recognized by Gartner in its Magic Quadrant, Virtustream was named by another analyst, Forrester Inc., as one of two "leaders" among hosted private cloud solutions, EMC noted.

EMC said the acquisition is expected to close in the third quarter of this year.