Verizon charts a different cloud services path

The telecom giant is unloading its data centers to focus on its services business.

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Martyn Williams

When running down the list of top cloud vendors, the name Verizon doesn't come up immediately, but the firm is looking to expand its particular brand of cloud services that complement main players like Amazon and Microsoft. It's also fending off rumors it's getting out of the cloud business. 

Late last year, the company denied reports it was looking to sell off its enterprise services business, which include cloud services and data centers. At the Wells Fargo Securities 2015 Technology, Media & Telecom Conference in late November, Verizon CFO Francis Shammo denied reports that his company is considering selling some of its enterprise assets after a Reuters report said just that. 

At that time, Verizon had been on a bit of a selling spree, unloading its residential landline assets for $10.54 billion to Frontier Communications in February 2015 and its cell tower portfolio for more than $5 billion. 

And it turns out Verizon was in a selling mood, but not of the cloud services. This month, Verizon said it would shut down its public cloud service, which competed with Amazon Web Services and Microsoft Azure. Or tried to. Customers were told they had one month to move their data or lose it forever. 

A few weeks back on the company's quarterly earnings call, Shammo confirmed that the company was considering selling its data centers but not the services. Verizon picked up a bunch of data centers when it bought Terremark in 2011, which was its entrance into the cloud business, and now it's considering doing with its data centers what it did with its cell towers: leasing rather than owning. 

All told, Verizon owns 48 data centers. "We will always look for opportunities," Shammo told analysts on the call. "The data center is an exploratory exercise to see if the asset is more valuable inside or outside the portfolio." 

Chris Antoitz, senior analyst for telecom at Technology Business Research, said a lot of telcos are looking to get out of the data center business because margins have come way down thanks to the "AWS effect," as he put it. Amazon has made it too difficult to keep up with running a data center profitably. 

[Related: Verizon gets 'black eye' in long cloud shutdown] 

"What they are trying to do is get out of owning and operating data centers and [would rather] work with partners and be an interconnect partner to facilitate cloud implementations for enterprises. So it's a different play from what they wanted to do," he said. 

The ‘Big 3’ are a tough act to follow 

Verizon isn't alone. Its arch-rival AT&T sold off its managed application and managed hosting services to IBM in mid-December and is also reportedly looking to unload its data centers. 

It's a tacit admission that no one can keep up with the big three data center providers Amazon, Microsoft and Google. "We're not targeting competing with hyperscale infrastructure service providers. At this stage of the game, chasing Microsoft, Google and Amazon is a fool's errand," says Dan Jablonski, director of IT solutions product management at Verizon. 

"Now, if you need partnership with an enterprise provider that cares about your business as much as you do, you need to speak with Verizon," he adds. "For us, it's about everything as a managed service. What we are going after is the true end-to-end SLA, from a business transaction hosted in our infrastructure, customer premises or hyperscale cloud infrastructure." 

Antoitz echoed this. "What Verizon is doing and where they have a value add is helping customers implement the cloud in their businesses and facilitating that. They are providing a connectivity layer to cloud, management tools, maybe provide hybrid cloud solutions that leverage on-premises with the cloud model and professional and integration services to make them all work together," he added. 

Verizon wants to move further into the private cloud market, with emphasis on managing apps along with the apps that it offers. It's more interested in mission- and business-critical apps rather than high churn like VMs that are set up and then dismantled, which is AWS's bread and butter. 

"There are a lot of customers who have legacy systems that need to be cared for. We do have professional services experts to help their journey to get onto a cloud or virtualized platform so they are movable and a lesser cost than dealing with the bare metal that customers care for themselves," says Jablonski. 

It's also looking to form partnerships with cloud vendors and software providers to move workloads around for when greater scale or redundancy is needed. This is done through Verizon's Secure Cloud Interconnect service, a high-speed private connection between global data centers, both Verizon's and others like Google and Amazon. 

Additionally, Verizon has three specific areas of focus and plans to broaden that offering to customers who only have one or two of the services. It offers a portfolio of IT, security and networking services and intends to use one as a leverage to offer the other two. 

"If I have an IT customer for whom we care for their mission critical ecommerce product and want to sell them DDoS protection, we'll look at ways to do that. Or maybe a network customer who needs a place to put workloads or have cloud backups. We'll provide value-added services through their network management interface," said Jablonski. 

Much of the investment in 2016 will be in making integration of these three services with a customer's existing enterprise easier, along with speeding up the delivery of Verizon offerings. "If you look at managed hosting or managing an app, speeding up the ability to deploy those systems and provision those systems becomes increasingly important," says Jablonski. 

Data center blues 

Verizon has had its ups and downs in the data center business. In mid-January, it suffered an outage that brought down JetBlue’s electronic systems, causing flight delays, shut down its online booking and check-in systems as well as its Website, causing a little public embarrassment. 

[Related: 3 misconceptions small business have about the cloud] 

On the plus side, Verizon was in charge of the real-time feeds for Super Bowl 50. It also offered what it called Super Bowl City, free high-speed connectivity to attendees of the big game. It also free provided streaming of the big game via the NFL Mobile and Go90 apps to Verizon Wireless customers. All went off without any major hiccups. 

Darrell Riekena, CIO of National DCP, a supply chain management firm that primarily serves Dunkin Donuts franchises, is a Verizon customer and said the company helped him turn off the lights in his data center as well as provide connections to 8,900 franchise locations. 

"They understand our business and franchise model and a have good proactive record around responsiveness and active monitoring. That was a core competency [required] in any provider I went to," he says. 

When National DCP relocated from Boston to Atlanta, it chose not to build a new data center at the Atlanta office, so it needed a partner to help migrate its legacy apps to a co-location facility and help migrate or build new apps in the cloud, and the company wanted one provider to do both tasks. "Verizon came to us to transfer out of the data center and brought a partner to help with cloud implementation," he says. Verizon used Protera, which specializes in SAP migrations to the cloud. 

Riekena also liked Verizon's attention to his business. "We're a small IT shop. I needed a partner that could help us with the design and implementation and have a confidence level that they could help us with the monitoring and support as well. The experience we have had with Verizon is they are an extension of our team, it doesn’t feel like a third-party outsourced arrangement," he says. 

National DCP and Dunkin Donuts have a very ambitious growth plan as the doughnut chain moves westward across the U.S. Dunkin expects to double in size in the next 10 years. As its primary supply chain partner, National DCP expects its business to grow right along with them. It will grow from seven distribution centers to 13 in the next five to 10 years. 

"The cloud allows me to pay for what I use versus sizing things for the future. I can pay for what I need today. We can crank that up as our business grows as well as leveraging Verizon from an infrastructure perspective," said Riekena.

Copyright © 2016 IDG Communications, Inc.

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