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Verizon on Verge of Enterprise Cloud Sale – Source

Ray Le Maistre
2/2/2017
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Less than two months after announcing the sale of its data centers in a $3.6 billion deal with Equinix, Verizon is on the verge of divesting itself of its broader enterprise cloud services business, Light Reading believes.

While there is no official confirmation – Verizon declined to comment -- a trusted source with knowledge of the deal tells Light Reading that a sale has been agreed and a public announcement is expected to be made during February or March. The identity of the buyer is being kept a close secret.

Rumors that Verizon Communications Inc. (NYSE: VZ) would sell off its enterprise business first started to emerge in 2015, a mere four years after the telecom operator bought cloud services company Terremark. Despite the competitive advantage that deal was supposed to deliver, Verizon showed early signs of struggling to build on Terremark's success. The telco lost out in the race for market share in public cloud services to Amazon.com Inc. (Nasdaq: AMZN), Google (Nasdaq: GOOG) and Microsoft Corp. (Nasdaq: MSFT), and while that acknowledgement could have and perhaps should have helped Verizon to double down in the enterprise sector, momentum never seemed to build.

Fellow carriers AT&T Inc. (NYSE: T), CenturyLink Inc. (NYSE: CTL) and Windstream Communications Inc. (NYSE: WIN), meanwhile, all continue to sell enterprise services. However, Windstream has sold off its physical data centers, and CenturyLink is in the process of doing the same. The focus for all three operators is shifting toward virtualization and away from physical assets. (See CenturyLink Sells Data Centers for $2.15B and Finally! Equinix Pays $3.6B for Verizon Data Centers.)

Verizon could have followed a similar path, but unlike the other large US carriers, Verizon never used its cloud capabilities to remake its own internal network. That has left Verizon's cloud business in more of an isolated position, and it makes the division more of an appealing target for sell-off.

Verizon has also prioritized spending elsewhere, notably with the $4.4 billion acquisition of AOL in 2015, and the pending $4.8 billion acquisition of Yahoo Inc. (Nasdaq: YHOO). The service provider believes its future growth will come from content and applications that run on top of its network, as well as from the development of 5G wireless technologies. (See Yahoo Signing Off in $4.83B Sale to Verizon and Verizon's $4.4B AOL Buy a Digital Media Play.)

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— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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kq4ym
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kq4ym,
User Rank: Light Sabre
2/15/2017 | 2:48:06 PM
Re: It all made sense a few years back....
Vewrizon, too, may be looking at a business plan that relies on getting lots and lots of customer names. Yahoo and AOL get them all those millions of potencial customers to it's main business, while playing in the cloud, although big profits are eventually possible, is not quite the same for a company who relies on a little bit of change every month from millions of folks.
brooks7
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brooks7,
User Rank: Light Sabre
2/2/2017 | 8:09:35 PM
Re: It all made sense a few years back....
 

I think one thing that they realize that outside of some special cases that the Internet is the only connectivity required.  Complex MPLS networks or Dark Fiber or Ethernet over SONET are niche applications.  These can have large connectivity capabilities for some clients in some cases (you are a web giant or you are a stock trader).  Basically if you have an MPLS network as an Enterprise, why not shift to a L3VPN and basically do what you were doing with MPLS for free.  Is it EXACTLY the same service and EXACTLY the same SLA?   No, but it can provide the same connectivity and nearly the same performance for a fraction of the price.  MPLS networks should be inside of service providers making other networks work.

Given all of that and the push into data centers, essentially all bandwidth from all providers is exactly the same.  I posted this years ago in threads like this and now it has come to be understood.  The ISPs have no advantage in Cloud Services.  They are INVISiBLE to Cloud Services or should be.  

The important part to Telepacific's Offering is actually IT outsourcing of basic services that a business needs.  If you buy their Managed Firewall, that's one less thing to manage.  Imagine having no IT people or just one that buys services.  That is where this is heading.  Why do you have an Exchange or Host Exchange Server?  What value is that bringing to your business over Office 365?  I can tell you the value to the IT person at your company (his paycheck).  Now the thing that probably ACTUALLY has value is Active Directory NOT Exchange.  By switching your mail to that service, you get rid of all your mail servers and spam filters.  You just pay a fee and its less than you pay your IT guy to run your servers.

seven
ethertype
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ethertype,
User Rank: Light Sabre
2/2/2017 | 7:11:49 PM
Re: It all made sense a few years back....
Telepacific is a perfect example. This is a relatively small, privately held managed service provider filling an important niche for small/mid-sized enterprise.  They likely make most of their money on bread-and-butter connectivity and managed communications services, but they are also starting to infusing "cloud" language and cloud-based services into their business.

As they do this, they are not building clouds.  They are building capabilities to connect their customers to the mega clouds. Less than a year ago, Telepacific joined the Microsoft Cloud Solution Provider Program and currently offers managed Office365 -- SaaS delivered from a mega cloud. I have no doubt that a few of their customers are also asking them for direct connect services to AWS, Azure or Google Cloud, and more will soon.

The end result is companies like this will become value-added niche service providers for small to mid-size businesses in a cloud-driven world.  There are dozens of such providers, and some of them are likely to have long-term success because they tailor their scale, cost structure and service mix to a customer segment that they can serve better than the big cloud guys.

Big telcos who want to stay in the enterprise IT services game will basically have to do the same but on a larger scale for larger enterprise. Going forward, they will either work with the mega clouds or they will find that they have a tenuous and probably unsustainable cloud strategy. 
brooks7
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brooks7,
User Rank: Light Sabre
2/2/2017 | 6:20:10 PM
Re: It all made sense a few years back....
Take a look at Telepacific....

seven

 
ethertype
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ethertype,
User Rank: Light Sabre
2/2/2017 | 6:15:15 PM
Re: It all made sense a few years back....
Yes a large part of the problem is that telcos are telcos so they have a hard time doing anything besides connectivity.  But the bigger problem is that these guys never believe in disruptive technologies - in this case, public cloud - until it's too late. Remember just a few years ago when AWS was viewed as a mere toy for R&D geeks to play with and no "serious" enterprise would trust their core apps to something like AWS? Yeah, that was the telcos too. 
James_B_Crawshaw
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James_B_Crawshaw,
User Rank: Blogger
2/2/2017 | 4:46:17 PM
Re: Do they know what they're doing?
Nicely put Mitch. Perhaps it is a case of hubris ...
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
2/2/2017 | 4:11:46 PM
Do they know what they're doing?
Media and entertainment is a tough business with entrenched players, some of which have literally a century of background, where it's difficult to succeed. 

Cloud is an extension of enterprise networking, where Verizon is a market leader with decades of experience. 

So why the heck is Verizon fleeing from the area where it knows what it's doing, and plunging into an industry where it's a newbie?
Carol Wilson
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Carol Wilson,
User Rank: Blogger
2/2/2017 | 2:12:44 PM
Re: It all made sense a few years back....
You have to wonder if the two businesses - managed services, i.e., the Terremark stuff - and the telecom aspect just didn't mesh as well as expected. 

These guys tried multiple times and in multiple ways to build a cloud services business that encompassed the two, but Verizon always seemed to gravitate back to the connection piece. 

And clearly, if as reported they are eying Charter as their next big buy, they don't need assets like this one any longer. 
Ray@LR
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50%
Ray@LR,
User Rank: Blogger
2/2/2017 | 1:33:50 PM
It all made sense a few years back....
A few years ago, enterprise cloud services was the golden opportunity for the telcos suffering from the post circuit-switched voice era blues.... but it was maybe all too little too late? The scale wasn't enough?

It's going to be VERY interesting to see where this ends up. 
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