Pop Quiz: What’s the fastest way to build a credible, enterprise-relevant and highly profitable cloud computing services practice? Buy one that already is. That’s exactly what Verizon did last week when it pushed $1.4B across the table to Terremark. Despite its internal efforts to build an infrastructure-as-a-service (IaaS) business over the last two years, Verizon simply couldn’t learn the best practices fast enough to have matched the gains in the market it received through this move. Terremark has one of the strongest IaaS hosting businesses in the market and perhaps the best enterprise mix in its customer base of the top tier providers. It also has a significant presence with government clients including the United States’ Government Services Agency (GSA) which has production systems running in a hybrid mode between Terremark’s IaaS and traditional managed hosting services.
Confidential Forrester client inquiries have shown struggles by Verizon to win competitive IaaS bids with its computing-as-a-service (CaaS) offering, often losing to Terremark. This led to Verizon reselling the Terremark solution (its CaaS for SMB) so they could try before the buy.
Forrester surveys of enterprise infrastructure & operations (I&O) professionals show that 29% are prioritizing investments in private cloud solutions in 2011 and that 40% see hosted private clouds as the most attractive option as they place the least amount of operational disruption on their staffs. Verizon and Terremark have both been investing in public and hosted cloud offerings to win this business. Terremark had a significant experiential lead as it has been running its ESX-based The Enterprise Cloud offering for the past several years. Both companies are also VMware vCloud partners with Terremark being one of the few service providers in the world operating a vCloud Express implementation, then one based on vCloud Director. Verizon was a poster child for vCloud Director at VMworld last fall and was expected to debut this as part of CaaS in early 2011. It will be interesting to see if they keep these plans moving forward or defer to Terremark. I suspect the latter as our customer insights point to Verizon having greater success reselling Terremark today than securing customers for CaaS.
This merger should be great news for I&O professionals and your cloud strategies as two trusted partners have come together to better serve your needs. The two companies combined have a first-class global data center presence, proven best practices in IaaS and enterprise class service management, control a significant segment of the backbone of the Internet, and boast a stable of additional managed services.
If Verizon wasn’t on the shortlist for your cloud RFP, they should be now. Expect to see other IaaS/MSP acquisitions to shore up the cloud strategies of the other leading telecommunications and outsourcing leaders.