A Santa Monica-based cloud management startup called ServiceMesh was acquired earlier this week for almost $350 million by IT giant CSC.

The acquisition was significant, as CSC is extremely well established with government customers.

The buy-up will mean that government agencies and entire cities can take advantage of modern technology, and run applications on public, private and hybrid clouds.

Steve Henning, ServiceMesh’s chief marketing officer, said in a phone interview this afternoon that it’s “very difficult” for startups to win government contracts. But with the CSC brand behind them, the sales team has a better shot at increasing its customer pool.

Government can certainly benefit from a startup like ServiceMesh, especially as it moves to the cloud. ServiceMesh gives IT administrators greater control, and lets them add compliance to a more changeable cloud infrastructure. Customers today are predominantly in financial services, health care and other highly regulated industries.

ServiceMesh’s technology won’t be shuttered in the wake of the acquisition. It will continue to operate for the current suite of customers.

According to Henning, VMware should be most concerned about this acquisition. “VMware is the company we have been most competitive with throughout our history,” he said. Rivals also include Dell‘s Enstratius and Rightscale.

The exit was a good outcome for the founders, investors and board, given that the company has only raised one round of funding. In 2011, ServiceMesh pulled in $15 million in venture capital from Ignition Partners.

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