EMC and VMware are establishing a new business unit under the Virtustream brand to bring together all of their cloud computing assets.

EMC acquired managed cloud specialist Virtustream earlier this year for $1.2 billion, and immediately said the deal would lay foundations for a new entity in its ‘federation’ – which also includes RSA, VCE and Pivotal - that would focus on services and products for the hybrid cloud.

The new cloud services business will be led by Rodney Rogers, co-founder and former CEO of Virtustream.

“I am honored and excited to have the opportunity to lead the new Virtustream,” said Rogers. “Our vision of combining our IP and collective cloud platform and services capabilities for mission-critical applications, backed by the strength and reach of EMC and VMware will deliver an enterprise-focused hybrid cloud solution that is unrivaled in the market.

“We expect Virtustream will become one of the top 5 service providers globally and are thrilled about what this means to all of our customers, partners, and the Federation moving forward.”

A hybrid for hybrid cloud

The original Virtustream was founded in 2009 to provide enterprise-class IT in the cloud. The company offered extensive cloud security, performance SLAs and charging based on usage, not resource allocation.

Virtustream’s xStream cloud management software platform is tightly integrated with VMware vSphere - yet another reason why the company was a good fit for EMC.

The new Virtustream will incorporate existing VMware cloud management products and the vCloud Air public cloud platform, Virtustream’s software assets including xStream, and EMC’s Storage Managed Services and Object Storage Services.

Half of the company will be owned by EMC and half – by VMware. EMC expects Virtustream to generate hundreds of millions of dollars in recurring revenue in 2016, and grow into a multi-billion business over the next several years.

“Through Virtustream, we are addressing the changes in buying patterns and IT cloud operation models that we are seeing in the market. Our customers consistently tell us that they are focused on their IT transformations and journeys to the hybrid cloud. The EMC Federation is now positioned as a complete provider of hybrid cloud offerings,” commented Joe Tucci, chairman and CEO of EMC.

Under the terms of the arrangement, Virtustream’s financial results will be consolidated into VMware’s financial statements beginning in the first quarter of 2016.

Tucci and VMware CEO Pat Gelsinger will both get a place on the Virtustream board.

Last week, Dell surprised the industry by announcing plans to buy EMC – a much larger company – for $67 billion. Following the announcement, Michael Dell promised to keep VMware within the company and not sell it off, going against the wishes of some activist investors.