3/31/2016
Virtustream now seated at the head table in managed services
IMPACT RPORT
Virtutream now eated at the head tale in managed
ervice
MARCH 30 2016
Y WILLIAM FLLOW (/IOGRAPHY?ID=113)
When Virtustream was acquired by EMC for $1.2bn in July 2015, it had 400 employees and a run rate of $100m. The
EMC Federation company now has some 2,000 employees and 20 datacenters, with the cloud and managed services
assets of EMC (but not VMware as once planned) under the charge of CEO Rodney Rogers. Virtustream's focus is
helping enterprises move 'second platform' applications, such as order­to­cash systems, to its hosted SAP
environment. Its target is firms with $250m revenue and more, plus government agencies.
The 451 Take
With Virtustream's head down assimilating assets and developing a strategy as a top­tier managed services player,
significant progress markers since its acquisition by EMC are going to be thin on the ground. The Vodafone deal
has certainly helped, but anticipated developments are its plans for the EMC storage­as­a­service (StaaS) offering,
the buildout of its Oracle attack vector, and plans for OpenStack. However, what is key remains that Virtustream is
offering precisely the kind of managed services – especially for moving and managing SAP deployments into the
cloud – that we believe will account for the majority of the future opportunity for infrastructure services. Up to
70% of the revenue in this business will be in the supply of managed services on top of infrastructure.
Context
Virtustream now rolls up the EMC global managed service team, including 1,500 people and 10 centers of excellence –
plus the VCE counterparts. With the addition of on­premises capability with VCE, the Virtustream managed services
group can now sell a complete hybrid package with one service experience and managed services on top. Virtustream
also takes on EMC's StaaS offering, which has been incubated internally. It's a distributed hyper­scale storage platform
that is currently at two­Exabyte size, with 100 billion objects under management. It's used primarily as a backup
service. It's not yet been publicly commercialized, and is only sold strategically.
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Virtustream's key revenue stream is direct sales, although it expects that to shift to the channel in time, via partnerships
with Infosys, Capgemini (since 2013), and other large systems integrator partners. Fifty percent of its business is IaaS­
specific, meaning 50% isn't – including all of the satellite applications around SAP such as accounting and CRM. This
will change over time, as Virtustream extends to Oracle and vertical­specific offerings such as EPIC in healthcare.
Besides extending from SAP to Oracle, Virtustream has also integrated OpenStack API compatibility, so it's likely to be
only a matter of time before it hits the OpenStack button as well. It also interoperates with VCE APIs.
Virtustream's most recent partnership had it choosing Vodafone to deliver its services in Germany. Vodafone's Cloud
and Hosting Services group will host xStream and VCE in its Vodafone datacenters – enabling customers to move their
SAP workloads to these facilities – and will take advantage of Vodafone's network services to comply with German
data­sovereignty requirements.
Technolog
Virtustream's key feature is its xStream service director tier and the microVM it uses, which measures consumption of
resources on a usage basis and provides capacity planning and billing – not on VMs, resource pools or allocated
assets, but on actual use. It can interrogate a customer's use, and plan what its consumption footprint would look like
deployed on­premises or in a Virtustream hosted environment.
The second key feature in xStream is the application automation provided by the Apache Brooklyn implementation of
Cloudsoft's application management platform software. This provides an automation layer around SAP – and will do so
on Oracle shortly. It enables Virtustream to chain together a series of individual tasks that together make up a complete
activity. For example, customers can use xStream to schedule all of the things necessary to shut down a SAP T&D
environment, chaining that together with the required dependency logic. Virtustream notes this would typically take
hours.
Virtustream says customers have, in particular, found considerable savings using the microVM consumption model
when it comes to shutting down and restarting environments over weekends and holidays. These customers no longer
have to do this, because Virtustream charges only for the amount of processor or memory being used at any time, not
on an allocated amount, which users typically have to provision at weekends – or shut down completely.
The automation itself is agnostic; however, the mechanisms it has created on top are highly SAP­specific. They
automate the SAP basis layer, for example, and it is code written for SAP. Most customers use the managed service,
which includes not only the infrastructure and database, but also full SAP lifecycle management – moving the engine
to and between SAP Financials, to SAP Financials HANA, SAP Simple Finance HANA and more.
Virtustream was the third global provider named by SAP as a HANA enterprise cloud – there are now five (HPE, IBM,
CenturyLink and Dimension Data). Virtustream acquired ViewTrust in 2014 to provide continuous monitoring and
governance, which is integrated with xStream. And while this was largely a side bet for the company, it does bring
Virtustream a good compliance­ready message.
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Virtustream now seated at the head table in managed services
Competition
Its acquisition by EMC (and subsequently of EMC by Dell) propels Virtustream to the head table of managed service
providers. Opportunities are still driven pretty much exclusively by its SAP expertise (e.g., the Vodafone deal), which
means HPE, Dimension Data, IBM and CenturyLink are the key competitors. However, its plan to try and replicate its
SAP market success in the Oracle world will take it into competition with Big Red.
WOT Anali
trength
Our research indicates nearly one­third of all IT infrastructure spending is going to cloud­related
technologies. Moreover, the buying of cloud services is shifting up to the application stack. We believe that
managed services on top of infrastructure are the key opportunity going forward.
Weaknee
The cloud is a mindset, not just a technology stack: a self­service 'cattle' over 'pets' approach to servers, on­
demand economics, and an application focus.
Opportunitie
Managed services enable organizations to improve their focus on the core business, free internal resources to
focus on more strategic projects, and avoid capital expenses.
Threat
The confusion, uncertainty and doubt among customers as Virtustream forges its strategy will be used as a
calling card by competitors.
William Fellow (/iograph?eid=113)
Research Vice President
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M&A ACTIVITY Y CTOR
Cloud (0) (http://mak.the451group.com/reult?aic_elected_ector=906)
Hoted ervice (1627) (http://mak.the451group.com/reult?aic_elected_ector=271)
M&A ACTIVITY Y ACQUIRR
Capgemini Group (18) (http://mak.the451group.com/reult?aic_acquirer=Capgemini+Group)
CenturLink [fka CenturTel] (14) (http://mak.the451group.com/reult?aic_acquirer=CenturLink+[fka CenturTel])
Dell Inc. (35) (http://mak.the451group.com/reult?aic_acquirer=Dell+Inc.)
Dimenion Data Holding plc (8) (http://mak.the451group.com/reult?aic_acquirer=Dimenion+Data Holding plc)
MC Corporation (77) (http://mak.the451group.com/reult?aic_acquirer=MC+Corporation)
IM Corporation (162) (http://mak.the451group.com/reult?aic_acquirer=IM+Corporation)
Info PO Limited [Info Technologie Ltd] (10) (http://mak.the451group.com/reult?aic_acquirer=Info+PO
Limited [Info Technologie Ltd])
Oracle Corporation (115) (http://mak.the451group.com/reult?aic_acquirer=Oracle+Corporation)
AP AG (53) (http://mak.the451group.com/reult?aic_acquirer=AP+AG)
pringource Inc [fka Interface21] [VMware] (40) (http://mak.the451group.com/reult?
aic_acquirer=pringource+Inc [fka Interface21] [VMware])
Virtutream Inc. (6) (http://mak.the451group.com/reult?aic_acquirer=Virtutream+Inc.)
Vodafone Autralia (28) (http://mak.the451group.com/reult?aic_acquirer=Vodafone+Autralia)
Figure hown indicate numer of tranaction
COMPANY MNTION (PRIMARY)
Virtutream (/earch?compan=Virtutream)
COMPANY MNTION (OTHR)
Capgemini, CenturLink, Cloudoft, Dell, Dimenion Data, MC, xate, HOTING, Hewlett Packard nterprie, IM, Info,
Opentack Foundation, Oracle, AP, imple Finance Technolog, VC, ViewTrut Technolog, VMware, Vodafone Group (/earch?
compan=Vodafone+Group)
CHANNL
Cloud Tranformation, ervice Provider (/dahoard?view=channel&channel=9)
CTOR
All / Cloud (/earch?ector=906)
All / Hoted ervice (/earch?ector=271)
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