SAP bets on Virtustream, OpenStack

SAP has worked with a handful of cloud providers including IBM, Amazon Web Services, Fujitsu and Virtustream so that its software runs well on those cloud services. SAP also offers its own cloud services for customers.

vote_2.jpgSource: League of Women’s Voters of California, via Flickr

But today, Virtustream is announcing that SAP led a $40 million investment in the cloud service provider. The investment marks an interesting seal of approval from SAP and might also energize OpenStack’s standing as an enterprise-worthy technology. It could also give Virtustream the fuel to grow rapidly.

Virtustream doesn’t have the name recognition of the big cloud infrastructure service providers. But it has been focused on enterprise customers from the start. Its technology allows it to guarantee app latency for customers.

“We’re telling a Fortune 500 CIO that they can move SAP to the cloud and have [assurance] for how that app is going to run for critical, revenue generating applications or systems,” said Rodney Rogers, chairman and CEO of Virtustream.

He said that Virtustream had been working closely with SAP “and one thing led to another… and they made an overture to invest in us.”

SAP does have some of its own cloud offerings so it seems a bit curious that it would invest in another company offering a similar service. “SAP is looking to have their own offering to offer to their select customers in a more perhaps controlled or homogeneous environment. They’re very focused on SAP while we’re focused on how SAP and all the related applications run in an infrastructure as a service format,” he said.

SAP joins Intel in investing in Virtustream. Having both those big names should give Virtustream some more credibility, particularly for potential customers that are deciding between Virtustream and more established names like IBM, Terremark or Savvis, he said.

The investment should also lend creditably to OpenStack. Virtustream is in the process of adopting OpenStack and the investment should help it move that process along, Rogers said.

In the first quarter of next year, customers will have the option of running on Virtustream’s public cloud that runs Virtustream’s technology on top of OpenStack or the public cloud that runs Virtustream’s technology on top of VMware’s VCenter. The OpenStack option will be cheaper. Customers will have the same option of OpenStack or Vmware for running a private cloud using Virtustream’s technology. Virtustream also licenses its technology, similarly with the OpenStack or VMware options, to cloud service providers.

It’s also not insignificant that Virtustream thinks the investment will help it double its capacity in the U.S. in the next six months. In the very competitive cloud service provider landscape, adding that kind of scale could make a big difference.

Finally, Virtustream also plans to use the investment to help it expand its cloud exchange. The company has been talking about this for a while now though so it’s hard to know if this is more wishful thinking.

Read more of Nancy Gohring's "To the Cloud" blog and follow the latest IT news at ITworld. Follow Nancy on Twitter at @ngohring and on Google+. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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