The acquisition of Rackspace by CenturyLink, if it was ever to happen, could give the network operator's cloud and virtualization efforts a significant helping hand, according to a Heavy Reading analyst.
Caroline Chappell, Principal Analyst, Cloud and NFV at Heavy Reading and long-time specialist in all things service provider IT-related, was intrigued this week by speculation that CenturyLink Inc. (NYSE: CTL) has had takeover conversations with cloud computing services specialist Rackspace . (See Is Rackspace the Best Next Move for CenturyLink?.)
She believes that if CenturyLink was to buy Rackspace, it would benefit the carrier in a number of ways. CenturyLink would "increase scale, and scale is important in the cloud services business," notes Chappell in comments emailed to Light Reading.
In addition, CenturyLink would gain "considerable OpenStack expertise… Rackspace is an industry leader here," and that would be "good for CenturyLink's NFV strategy," says the analyst. It would also "deepen its cloud/software skills base," and that's an important point, because, as Rackspace's cloud architect Troy Toman noted at the Atlanta OpenStack Summit in May this year, the top five global cloud providers will spend $25 billion on cloud R&D in 2014. That means the telcos have a lot of work to do to catch up with those levels of investments, so "acquisitions can help" them make up some ground, notes Chappell.
But the telcos might need to get a move on if they're looking to pump up their cloud capabilities through M&A. "The top independent cloud services providers are gradually being snapped up," notes Chappell, citing the acquisition of SoftLayer by IBM.
And CenturyLink won't be alone in thinking about cloud M&A, believes Chappell. "Other telcos may be eyeing up what's left," such as GoGrid Cloud Hosting . (See GoGrid Puts Cloud at Touch of a Button.)
— Ray Le Maistre, , Editor-in-Chief, Light Reading