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Verizon to Buy CloudSwitch

Carol Wilson
8/25/2011

Verizon Communications Inc. (NYSE: VZ) is acquiring CloudSwitch Inc. , a privately held firm whose software makes it easier for enterprises to move applications into the cloud or between cloud platforms. (see Verizon Buys Cloud Software Firm.)

CloudSwitch will be integrated into Terremark, the Verizon IT services subsidiary built on one of its previous acquisitions, and is intended to address two fundamental concerns enterprises have about moving to the cloud: the need to rewrite their existing applications to fit in the cloud environment and the fear of being locked into a specific cloud platform once they move. (See Verizon Taps Terremark for $1.4B and Verizon Keeps Terremark Brand on Cloud.)

The acquisition could give Verizon a strategic advantage over other cloud players by making it easier for enterprises to use the Terremark cloud, says Melanie A. Posey, Research VP, Hosting & Managed Network Services for IDC .

"This is a software acquisition," says Kerry Bailey, president of Terremark. "It will allow enterprises to get their applications easily and securely moved not just from behind the firewall in their own virtualized environment but even from cloud to cloud. We believe in not telling customers they have to be locked into a specific cloud."

CloudSwitch's software essentially creates a layer of software -- an abstraction layer -- that sits between the customer's application and operation system and the cloud provider's virtualized environment, says Ellen Rubin, founder and VP, products, CloudSwitch. When a customer wants to move an application into the cloud, a point-and-click process creates an encrypted tunnel and also encrypts the data and applications that travel that tunnel.

That software layer then allows the applications to function on the cloud platform, regardless of whether they are using the same virtual operating system or system version.

"In layman's terms, this is an integrated connector," says Posey. "If you are an enterprise looking at cloud options, this could influence you to make Terremark your first choice. They will be able to tell enterprises that they can use the Terremark cloud and their applications will have the same look and feel as they do now, which is something that Amazon or AT&T or IBM wouldn't be able to do."

Cloudswitch developed its software because enterprises are more reluctant to move applications into the cloud if it means rewriting them or even moving to a different virtual environment or a different version of the same Hypervisor, Rubin says.

"Enterprises have a particular way they have architected their storage, they have management tools, they have internal IP addresses and they have set that all up for hundreds of applications, with a whole set of procedures," she says. "They are nervous about having to commit to re-architecting everything they've built.

Those concerns are particularly high in these early days of cloud deployment when there aren't any standards, says Amy DeCarlo, principal analyst, Managed IT Services, Current Analysis .

She cautions, however, that Terremark must still integrate CloudSwitch and that there may be applications licensing issues to resolve as well.

"If the customer is bringing their own application and they are running it in the provider's cloud, it's not clear to me whether there are going to be licensing concerns," DeCarlo says.

Both analysts credit Verizon with continuing its aggressive buildout of a cloud infrastructure and with taking a big picture view of the market.

"It's not such as a common thing to see a service provider buying software and certainly not one that has this big telco business like Verizon," Posey says. "So it kinda gives Verizon the differentiation of having its own intellectual property that it is building into its cloud solutions."

— Carol Wilson, Chief Editor, Events, Light Reading

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