VMware is buying a small stake in a co-location partner. The company  has agreed to buy $20(£12.5) million's worth of Terremark shares to take a 5 percent holding in the managed services company.

"VMware and Terremark have worked together for years, with VMware's software being a key component of our suite of virtualized offerings," said Manuel Medina, Terremark's 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 data-centre capacity to third-party organisations. Customers can manage their own hardware at its facilities or sign up for managed hosting services using Terremark's equipment. Terremark uses VMware's virtualisation software to run those 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 data centres and those of so-called cloud computing providers. It needs partnerships with companies such as Terremark to make that possible. Terremark's rivals in the space include Savvis and SunGard.

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