EMC Corp.’s and VMware Inc.’s cloud computing efforts are to be reorganized into a new business unit that combines units from both with those of Virtustream, the cloud software and services provider that EMC acquired in a $1.2 billion deal earlier this year.

The new venture will operate under the Virtustream banner, with Virtustream CEO Rodney Rogers taking charge of the day to day running of the unit. For its part, Virtustream will become a new ‘Cloud Services Business” under EMC and VMware, who will each own 50 percent of the new entity. Virtustream’s earnings will be reported under VMware’s quarterly earnings, which means we’ll be able to keep a close eye on its performance going forward.

Coming against the backdrop of EMC’s acquisition by Dell Inc. last week, the move is a mean feat of financial engineering, and wreaks havoc with those who thought they had a good grip on the structure of EMC’s Federation of companies.

My diagram of ownership in the Federation just got torn up. #dellemc #DellWorld #cloud https://t.co/WJDqO7yOxT

— Stuart Miniman (@stu) October 20, 2015

While tricky accounting is probably one reason for doing so, the bigger motivation is that Dell/EMC/VMware all realize they need to grab a slice of the hybrid cloud market, suggests TechCrunch’s Ron Miller. The three legacy vendors represent the “old guard”, but at the same time they know where the industry is moving. They’ve looked on enviously as companies like Amazon Web Services rise to the top of the cloud, and desperately need to find a way to stay relevant. As such, the hybrid cloud is a solid strategy because it lets Dell/EMC/VMware continue their transition to the cloud from the data center, where they’re most at home.

Dell #cloud strategy sounds like not competing w public cloud (supplying to them) and enable hybrid and ecosystem. #DellWorld — Stuart Miniman (@stu) October 20, 2015

The new look Cloud Services Business will offer a hybrid portfolio that lets VMware combine its cloud management tools with Virtustream’s services, answering those critics who say the company lacks a viable as-a-service offering. It’ll also combine components of EMC’s Information Infrastructure unit, managed storage services, and VCE.

The Cloud Services Business will pump out “multiple hundreds of millions of dollars in recurring revenue in 2016” for VMware, and “become one of the top five service providers globally,” said Virtustream’s Rogers in a statement.

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