Rumor has it Verizon is selling off data centers

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A Reuters article citing "people familiar with the matter" indicated that Verizon kicked off the new year by putting its colocation and hosting data centers up for sale. If true, then Verizon may be the latest cloud casualty, which would be a significant reversal of its strategy that currently revolves around assets and people it gained from the acquisition of Terremark Worldwide for $1.4 billion in 2011.

According to Reuters, Verizon plans to concentrate on its core businesses. In other words, wireless carrier services. Even recently, it appeared Verizon, like other telcos, was prepared to invest in and expand its hosting, colocation and cloud offerings. It has been a significant trend in the cloud business over the last few years as more and more telecommunications providers entered the cloud business game in the hopes of capturing some of the cloud market share from established cloud providers like Amazon Web Services and Microsoft Azure.

The data centers, which Reuters referred to Verizon's "colocation portfolio," includes 48 data centers. If Verizon is selling the facilities, it will need a rather large buyer, unless it's prepared to sell them off piecemeal to several parties.

A Channel Partners article noted many changes regarding hosting and cloud in the telco space. Executives at traditional telcos appear to be rethinking their decision to compete with colocation, hosting and cloud companies. Windstream exited the market in October through the sale of its hosting unit to TierPoint, and CenturyLink, which has no plans to exit the market entirely, is considering downsizing its data center portfolio.

The Channel Partners article quoted Cliff Grossner, research director of data center, cloud and SDN at IHS. Grossner indicated the difficulty and commitment needed to compete in the infrastructure as a service market, particularly if companies wish to try to keep pace with the largest public cloud competitors in the space.

Part of the challenge is competing on price. AWS, Microsoft and Google have consistently reduced prices to the point the next price cut is always just around the corner. This week, Amazon announced its 51st price cut since beginning its cloud operations in 2006. See more about that in this issue of FierceDevOps.

Some telcos are shifting away from running their own cloud and hosting businesses, instead choosing to partner with cloud providers they were previously competing directly against. A good example of that is the recent partnership between AT&T and IBM, which saw the telco shift many of its hosting assets to Big Blue.

One of the biggest challenges in the IaaS space for smaller players (read: not AWS, Microsoft or Google) is differentiating enough to attract customers. Grossner noted in the Channel Partners article that there is a place for smaller players, but he also indicated there could be more attrition among tier two IaaS providers in time.

For more:
- read the Reuters article
- read the Channel Partners article

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