If Verizon is prepared to sell off its enterprise unit, as reported exclusively by Reuters on Friday, it is a major shift in the telecom landscape and a sign that competing with web-scale companies on cloud services is proving difficult to impossible for telecom operators.

The Reuters report said Verizon Communications Inc. (NYSE: VZ) is looking to divest Verizon Enterprise Solutions for about $10 billion.

The fact that Verizon might be conceding defeat in the enterprise space, preparing to sell once-valued assets because of an inability to compete cost-effectively as the industry shifts to cloud-based IT is stunning, if true. Enterprise network services were once the heartbeat of telecom operations and a significant profit center, but that has apparently shifted to mobile services.

Already, AT&T Inc. (NYSE: T) and Verizon have conceded the public cloud to the likes of Amazon Web Services Inc. , Google (Nasdaq: GOOG) and Microsoft Corp. (Nasdaq: MSFT), and shifted their strategies to providing secure and dynamic connections to hybrid clouds. CenturyLink Inc. (NYSE: CTL), meanwhile, is reshaping its entire network operation to be cloud-based, but announced it is selling off its physical data centers (something AT&T is rumored to be doing as well), while Windstream Communications Inc. (Nasdaq: WIN) is now selling managed services but has divested its physical data center in a sale to TierPoint. (See AT&T Cloud Strategy Now Focuses on Network and Carmakers Closing In on Nokia HERE – Report.)

"These are the death throes of telcos' IaaS/PaaS/SaaS ambitions -- at least in the uber-competitive US cloud market," notes Caroline Chappell, principal analyst with Heavy Reading. "But it doesn't mean the end of enterprise cloud services per se -- just a morphing of what those services will look like. In future, telco cloud services need to be NFV/SDN-based -- i.e., hybrid cloud connectivity services, highly dynamic and delivered on-demand, hosted at the edge, and delivered via self-service. So telcos won't need so many big, centralized data centers to run them -- but lots smaller, distributed locations that take advantage of their network footprint."

CenturyLink, AT&T and Windstream have all said they will continue to sell enterprise services. In fact CenturyLink and AT&T are rolling out services very much along the lines of what Chappell describes. What Verizon seems to be saying is very different -- in fact the Reuters report claims CenturyLink was one potential buyer of Verizon Enterprise but that the two couldn't agree on a price.

A Verizon corporate spokesman said this morning that the company is declining to comment on the reported sale. He added, however, that CFO Fran Shammo will likely have more to say Tuesday morning when he speaks at a Wells Fargo conference.

Chappell sees the telecom cloud market moving in a very different direction from where it first headed, building on virtualization through NFV and SDN, and being able to deliver the Internet of Things as well, a trend that will likely first monetize on the enterprise side.

"NFV/SDN-based services will support new, cloud-based enterprise value chains, such as IoT, but the compute and application hosting part of that will be in enterprise private clouds and/or OTT public clouds," she says. "If you think about IoT, you want the hosting to be as cheap as possible and telco cloud cost points might have once been okay for big, legacy [enterprise] systems that needed a lot of managed service wrap, but were never going to fly for IoT."

Verizon Enterprise includes both the MCI networking assets Verizon acquired way back in 2006, its Terremark cloud operation and significant investments the company has made in things such as its managed security services operation. In recent years, there have been efforts made to link its enterprise and wireless operations so that cloud services could be delivered to enterprises over both platforms. Decoupling the businesses will be an interesting process to watch.

And given Verizon management's wireless focus, it may be that the company maintains some aspect of the infrastructure used for IoT or some services contract going forward with the new owner.

Speculation is already running rampant as to who might buy the Verizon Communications enterprise business, which is reportedly up for sale at a $10 billion price. Among the leading candidates are Comcast Corp. (Nasdaq: CMCSA, CMCSK), which is itching to expand further into enterprise sales, and Level 3 Communications Inc. (NYSE: LVLT), a company that has repeatedly grown through acquisition and has turned its focus to the enterprise of late.

Other possible bidders could include international network operators looking for a stronger footprint in the US, according to this interesting analysis by Rob Powell of Telecom Ramblings. He speculates a private equity deal might be the most likely option.

Stay tuned for further details as this story continues to unfold.

— Carol Wilson, Editor-at-Large, Light Reading