US telecom giant Verizon recently has made a series of announcements and investments that it hopes will position it as an important Cloud services provider for large enterprises. Saugatuck understands the goals and the rationale, but we’re not at all certain that Verizon will be able to accomplish what it has planned.

First, the announcements: Last month, Verizon announced that it will be rolling out a new Cloud Infrastructure-as-a-Service (IaaS) platform and a Cloud-based object storage service. The new services – Verizon Cloud Compute and Verizon Cloud Storage – are being marketed using branding very similar to the existing enterprise Cloud services offered by Verizon subsidiary Terremark, and are being positioned so that, according to Verizon, “large enterprises, mid-size companies and small development shops will get the agility and economic benefit of a generic public cloud along with the reliability and scale of an enterprise-level service with unprecedented control of performance.”

The newly-positioned Cloud services are being rolled out in a staged beta program beginning in Q4 of 2013, with a staged rollout adding customers each month as Verizon begins to scale itself up from an initial data center in Virginia toward a group of data centers, including locations in the US states of CA, CO, and FL, along with sites in Amsterdam, London, and Sao Paolo.

Meanwhile, Verizon has also been announcing more plans and efforts to increase its enterprise-oriented Cloud ecosystem, including identity management services and a partnership with Hadoop-driven big data analytics provider Cloudera.

We understand why Verizon is pushing itself as a Cloud IT services provider, and we understand why Verizon is aiming at large enterprises (LEs). But we also understand that history suggests that Verizon is unlikely to gain significant LE Cloud IT services share without some significant changes in its business.

Why is it Happening?

Becoming a Cloud services provider is a natural path for Verizon to follow; after all, a huge amount of US-based Cloud services are delivered via, and closely tied to, the company’s network. Verizon-provided bandwidth and network management are key enablers of Cloud services in general. As a result of this, the company has seen such providers as Amazon Web Services, HP, IBM, Microsoft, Rackspace and others profit by building on its networks and related services. Verizon saw enough promise in Cloud-based IT services that it acquired Terremark to help it profit from such offerings. Adding to and marketing such services can help Verizon to leverage the Terremark subsidiary into a much more significant revenue source.

Saugatuck’s own research indicates a continued, accelerating, and increasingly obvious swing in LE spending and references from traditional IT toward Cloud-based IT. Subscribers to Saugatuck’s Continuous Research Services (CRS) have tracked this swing, and its increasing momentum, since 2004.

Finally, as Verizon’s now-wholly-owned Wireless subsidiary approaches subscriber saturation in the US market, the company is smart to look toward other sources of revenue and ways to increase its customer presence.

Click here to read the market impact.

This blog was originally published at Saugatuck's Lens360 blog on November 8, 2013. Published with permission.

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