VMware is buying a five per cent stake in Terremark, a close partner that provides collocation and managed infrastructure services using VMware's virtualisation software.

VMware has agreed to buy four million Terremark shares at US$5 per share, a $0.20 premium on the Terremark closing share price on Tuesday. The investment is valued at $20 million, the company said.

"VMware and Terremark have worked together for years, with VMware software being a key component of our suite of virtualised offerings," said Manuel Medina, the Terremark chairman and CEO.

"We look forward to continuing our long relationship with VMware as we develop reliable and scalable virtualisation solutions for enterprise and federal customers," he said.

Terremark rents datacentre capacity to third-party organisations. Customers can manage their own hardware at its facilities or sign up for managed hosting services using the Terremark equipment. Terremark uses VMware virtualisation software to run its managed services.

The companies are already close partners, with VMware naming Terremark as its "service provider of the year" for 2009. Their relationship appears set to get closer.

VMware is developing software that allows companies to move workloads between their own datacentres and those of so-called cloud computing providers. It needs partnerships with companies such as Terremark to make that possible. Terremark rivals in the space include Savvis and SunGard.

VMware didn't respond to requests for comment about the investment. VMware is majority-owned by EMC.