Verizon recently sold its cloud and managed hosting services to IBM in a deal that also includes further collaboration on networking and cloud services. The companies said the deal will allow each to “fully realize the benefits of their cloud computing investments.”
“This agreement presents a great opportunity for Verizon Enterprise Solutions and our customers,” the service provider said. “It is the latest development in an ongoing IT strategy aimed at allowing us to focus on helping our customers securely and reliably connect to their cloud resources and utilize cloud-enabled applications.”
Verizon said the deal plays into its plans of providing managed services bolstered by an ecosystem of technologies and network assets from internal and external sources. Verizon plans to notify customers impacted by the move as the deal nears a closing, which is scheduled for later this year.
The carrier last year shut down its public cloud in a move Verizon said at the time would allow it to focus its efforts on the enterprise space.
“We have an enterprise-class range of cloud services including multi-tenant offerings such as cloud storage and virtual private cloud for enterprise and government customers,” the carrier said at the time. “We’re making significant investments in our cloud platform in 2016.”
The deal with IBM looks to bring to an end Verizon’s attempts to enter the cloud services market, which began with its purchase of Terremark in 2011. Analysts noted the carrier appeared to falter in those plans due to indecision at the company.
“In the years following this acquisition, Verizon’s cloud strategy waivered, and the vendor [Verizon] relaunched its cloud portfolio numerous times,” said Kelsey Mason, analyst at Technology Business Research. “Verizon was never able to make a true run at the public cloud space against leaders Amazon Web Services (AWS) and Microsoft before de-emphasizing the business in 2014, and finally exiting the space in April 2016.”
Moving forward, Mason said the IBM deal should allow the operator to allocate resources to core operations.
“This deal with IBM finally clears up the uncertainty around Verizon’s cloud business that has loomed for years: Verizon has shifted from a cloud provider to a cloud enabler,” Mason said. “Verizon’s planned exit from infrastructure-as-a-service (IaaS) allows the vendor to focus on more strategic areas such as IoT, hybrid enablement, and digital advertising that better utilize the vendor’s inherent strengths in networking, managed services, and communications.”
In addition to selling off cloud assets, Verizon has been aggressively altering its data center lineup. The company recently closed on the sale of 24 data centers to Equinix for approximately $3.6 billion, which Verizon stated would not impact its managed hosting and cloud offerings.
Verizon last month told SDxCentral the company planned to eventually have 24 data centers in the U.S. and 18 overseas. Radhika Venkatraman, SVP and CIO of network and technology at Verizon, said the data centers would support the carrier’s Cloud Platform, with the U.S.-based data centers hosting services for enterprise customers and for Verizon’s network infrastructure, while the international sites will only host the enterprise business.
AT&T Followed Verizon in Exiting Cloud Business
Verizon’s deal with IBM came just ahead of an agreement this week between AT&T and Oracle that will move thousands of the telecommunication operator’s internal databases to the Oracle Cloud IaaS and the Platform-as-a-Service (PaaS).
Oracle and AT&T said the deal includes the migration of thousands of existing Oracle databases and associated applications to Oracle Cloud. The move is set to provide AT&T with access to those assets via Oracle’s public cloud platform and its own AT&T Integrated Cloud (AIC), and provide AT&T enterprise customers with more access choices.
“We remain aggressive in our internal migration to the cloud and transforming our network to be software-centric and data-powered,” AT&T said in a statement. “It’s too early to discuss impact. However, we see this collaboration with Oracle accelerating our network transformation to expand efficiency, performance, and reduce cost while improving overall customer service.”
AT&T in late 2015 signed a deal with IBM to offload some of its managed services, along with associated equipment and data center space.
Growing Market, But AWS Dominates
Roger Entner, founder of Recon Analytics, said he was not surprised by the deals, noting while the original thought was around carrier-owned cloud services, enterprise customers in general are looking for carrier-agnostic options.
“For someone like Verizon, it’s a tough pill to swallow as they like to own their assets,” Entner said. “AT&T is more willing to partner, which is a last resort for Verizon.”
Telecom operators were also not able to compete on a cost basis against the cloud market heavyweight in Amazon, which could also prove a hurdle for IBM and Oracle.
“There are 523 cloud providers left in the world, and it’s an economy of scale business,” Entner said. “Everyone has problems keeping pace with AWS on pricing, even Google. It just made sense for the telecom guys to get out of it.”
The move by telecommunication operators away from native cloud platforms comes as analysts see growing enterprise interest in potential benefits from tapping into such deployments.
Gartner earlier this year released a report predicting the worldwide public cloud services market would grow 18 percent this year to $246.8 billion. Cloud system infrastructure services were cited as driving the market, with estimates of 36.8 percent growth this year to $34.6 billion. Cloud application services were forecast to grow 20.1 percent in hitting $46.3 billion in total market value.
“While some organizations are still figuring out where cloud actually fits in their overall IT strategy, an effort to cost optimize and bring forth the path to transformation holds strong promise and results for IT outsourcing buyers,” said Sid Nag, research director at Gartner. “Gartner predicts that through 2020, cloud adoption strategies will influence more than 50 percent of IT outsourcing deals.”