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VMware eats Digital Fuel

Will p*ss fire and put the heat on IT budgets

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Server virtualization juggernaut and cloud plumbing supply provider VMware has acquired Digital Fuel Technologies, a company that has created online applications for doing IT costing, budgeting, planning, showback and chargeback. Digital Fuel has also built systems for implementing service level agreements for IT infrastructure and tracking key metrics to give IT managers performance anxiety.

VMware has had chargeback and capacity planning features embedded in its ESX hypervisor and related vCenter management console since these functions were grafted onto the vSphere 4.0 stack back in August 2009. The vCenter Chargeback and vCenter CapacityIQ features have been updated since then, but other specialists have carved niches for themselves in doing the bean-counting for virtualized server environments. These include VKernel with vOperations Suite, Embotics with V-Commander, and Cloud Cruiser with Cloud Optimizer, just to name a few. The idea behind all of these tools as well as the services provided by Digital Fuel is that IT shops want to implement something akin to the pay-per-use pricing of public clouds on their internal and external capacity and then charge the users, departments, geographies, and business lines for the capacity they use.

Clearly VMware thinks its own chargeback features are not up to snuff, or it would not be shelling out a rumored $85m to acquire Digital Fuel, as reported in Israeli business newspaper Globes.

Digital Fuel's IT Financial Management suite is written in Java and has a visual front end that is a must for the financial types. At the heart of the product is an IT cost allocation engine, which includes the rules tracking capacity used as well as carving up who gets to pay for it as it is consumed, as well as a service level engine that sets performance levels for IT resources – and measures how well or poorly the systems map to expectations. The system has connectors for popular ERP systems to collect user and performance data and a slew of prebuilt reports to show who is running over-budget and where costs could be trimmed based on resource allocation and actual usage. The system can show capital versus operating expenses, and has a "what-if" scenario builder that can, for instance, show the effect on the IT budgets if a chunk of servers in the data center are virtualized.

That might come in pretty handy for VMware's sales reps, too.

Digital Fuel was founded in Jerusalem in 2000 and is now based in San Mateo, California, with development labs in Israel. Company co-founder Benny Lehmann died in 2004, but co-founders Israel Dancziger, Gilad Raz and Yakov Kogan are still at the company as CEO, CTO, and vice president of engineering, respectively. Digital Fuel's first product, ServiceFlow, was created to manage service level agreements, and in the past three years, the company expanded this to cover all aspects of IT budgeting and performance monitoring. The company has 150 employees, all of whom are coming over to VMware, including Digital Fuel's co-founders.

The company has raised $45m in five rounds of funding, the last of which came in March 2007. Apax Partners, Benchmark Capital, Focus Ventures, Israel Seed Partners, and Sigma Partners are the key investors.

VMware did not disclose the acquisition price for the company, and said it expects the deal to close in July. ®

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