VMware to acquire Digital Fuel

VMware's latest acquisition, reportedly worth $85 million, will bolster chargeback and service-level reporting within VMware’s portfolio, the company claims.

VMware announced after market close Monday that it will acquire Digital Fuel, a company specializing in IT financial and business management, laying the groundwork for stronger chargeback offerings.

“With this acquisition, VMware will enable enterprises to more effectively manage the business impact of IT environments, centralizing visibility of IT costs, integrating financial discipline into IT decisions, and delivering meaningful measurements and reports that drive engagement with the CFO and line of business stakeholders,” according to a VMware press release.

Terms of the deal, which is expected to close in July, were not publicly announced, but Globes reports the sale is valued at about $85 million. Nearly all Digital Fuel’s employees will join VMware, including CEO Yisrael Dancziger. The intellectual property will be integrated with VMware vCenter Chargeback, according to a spokesperson, but will remain a separate branded offering.

Digital Fuel’s IT Financial Management software is a Software as a Service application, and the messaging from VMware around the acquisition is aimed squarely at the enterprise. 

“Cloud now provides an external benchmark for the CIO…to compare the cost and value of internally provided IT services,” wrote Ramin Sayar, vice president of products, Enterprise Management for VMware, in a blog post.

“So how do you defend yourself and the value you deliver in comparison with an external benchmark?  You need the numbers -- credible, supportable numbers. Back of the envelope calculations, out of date Excel spreadsheets, and gut feel only get you so far when facing a CFO who says ‘Here’s what Amazon says they can do it for. Can you do better?’” added Sayar.

More granular chargeback on user wish lists
One of the thornier problems of moving to private clouds is chargeback, especially the ability to calculate costs according to dynamic resources such as virtual CPUs rather than whole servers.

That requires adjusting not only existing chargeback methods, but also existing business processes -- a problem VMware is proposing to solve with this acquisition.

“You get sprawl once you buy a [virtual machine],” said a senior systems engineer with a Fortune 50 company.  End users often treat a VM like a physical box and think it will be available for years, “instead of looking at it as a resource -- CPU, memory, what have you.”

In the meantime, “If you look at the clouds, [like] Amazon…they do a straightforward chargeback based on the amount of resources you use…a lot of people are starting to look at that as a different model of purchasing, as opposed to the old ways,” said the user.  As for the Digital Fuel acquisition, “Is it surprising? No. A lot of companies are moving in that direction. Because the way it works now, companies either overcharge or undercharge, and then they’re left hanging with VM sprawl.”

VMware also competes with several independent software vendors that offer chargeback and business-level reporting capabilities, including VKernel, which has brushed up its vOperations Suite in recent weeks. This acquisition also brings VMware into closer competition with IT management suites offered by CA Technologies and BMC Software.

One advantage those vendors have is that they can monitor heterogeneous hypervisors, something VMware’s tools don’t do today. The Fortune 50 user declined to say which reporting tool he uses currently, but said it probably won’t hurt to do a proof of concept on whatever VMware ends up offering.

“There are a lot of [tools] out there,” he said. “But the question is, which one integrates and plays nicely with all the other hypervisors out there? That would be the [next] step.”

The heat is on when it comes to virtualization management tools, according to Gartner analyst Chris Wolf.

“What this tells VMware's management partners is that VMware feels that future enterprise management is up for grabs and that they want to be competitive,” Wolf wrote in an email. “Vendors like CA and BMC will continue to be technology partners, but strategically must realize that VMware is trying to build a portfolio to compete against them.”

Beth Pariseau is a senior news writer for SearchServerVirtualization.com. Write to her at bpariseau@techtarget.com.

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