Verizon Communications Inc. has announced its acquisition of CloudSwitch Inc., a vendor of cloud software technology,...
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in a deal aimed to spur enterprise migration to the cloud by promoting the movement of workloads between and among clouds. Terms of the deal were not disclosed. Verizon plans to combine CloudSwitch, a privately held company based in Burlington, Mass., with its Terremark IT services subsidiary.
With the CloudSwitch deal, Verizon picks up what is potentially very valuable technology it can use to facilitate secure and dynamic movement of workloads in hybrid cloud and cloud-to-cloud environments. This helps Verizon stand out through its Terremark unit in what is a very noisy and crowded market, highlighting the company’s investment in technology to support a more open and flexible cloud model than most its rivals.
Verizon is adding application and hypervisor-neutral technology that can be used to migrate enterprise applications to the cloud with relative ease. The CloudSwitch software, which is deployed as a virtual machine (VM) appliance that discovers applications and can help orchestrate and manage cloud environments, will allow customers to move multi-tiered software applications into the cloud without requiring a major reengineering effort.
The provider is acquiring intellectual property that will help counter enterprise anxiety about being tied to one provider and one provider only in the cloud. CloudSwitch software, which supplies a mechanism for businesses to move application workloads between their own data centers and the provider’s cloud without rewriting the application, should also provide a secure route between multiple provider clouds.
Founded in 2008, CloudSwitch has a solution that is field-tested and in production, with approximately 15 enterprise accounts currently using the software appliance. That the CloudSwitch software is being adopted by business customers and delivered through third-party partners such as Capgemini is the best validation of the technology’s relevance and the fact that it can work in a production environment.
Verizon’s Terremark unit is gaining more than just technology; the provider will also profit from CloudSwitch’s significant cloud development expertise. The provider, which has publicly stated its desire to develop its own cloud orchestration software, can leverage this skill set to build out a better differentiated and scalable foundation for all of its cloud services.
With Verizon still in the midst of consolidating most of its cloud and other managed IT services with the Terremark offerings, including all of the associated product rationalization that goes along with this effort, adding the integration of new technology and CloudSwitch’s development team introduces a new wrinkle that could complicate and potentially slow the achievement of the provider’s goal to have one unified set of on-demand solutions.
Although CloudSwitch boasts that its technology is application-agnostic in theory, there are still some hurdles to overcome in practice which could introduce some licensing issues for Verizon. For example, if a customer is running an in-house developed application written using third-party code, the provider will need to be able to (a) recognize there is a potential licensing issue and (b) make sure the customer understands its responsibility.
While events such as the Verizon CloudSwitch acquisition help reinforce the provider’s very aggressive efforts to position itself as an innovator in the cloud space, the company is not alone in declaring its ambitions to build flexible, open, and secure on-demand services. Rivals have declared their intentions to play cloud broker roles for customers, and we can expect that it is only a matter of time before we see how competitors will respond with similar capabilities to move workloads between clouds.
CloudSwitch is a very small operation, founded in 2008 with just 30 employees and boasting 15 customers today. Scaling that up to Terremark’s level of operations will be a significant challenge, and a lot creative talent may be lost in the transition.
Response and recommendations
The Verizon CloudSwitch acquisition gives the provider a prime opportunity to distinguish itself from rivals on the basis of the open and dynamic nature of its cloud services. Verizon should emphasize that it is committed to providing services that will support the best, most stable and secure experience for its customers.
Verizon has been very effective in communicating its plans to leverage the on-demand delivery model to supply customers with a host of cost-effective, dynamic, and high-performing managed IT services. Acquisitions such Terremark and CloudSwitch reinforce this positioning by demonstrating the provider is making a significant investment in cloud infrastructure and technology. To maintain this momentum, Verizon will need to show it has not taken on too much with the integration of more technology into its portfolio so close on the heels of its Terremark acquisition by detailing when and how it will embed the CloudSwitch technology into its services catalog.
The company also needs to clarify its plans for consolidating and rationalizing the previously separate Verizon and Terremark cloud services suite. Verizon should offer up a timeline of when it will introduce an integrated suite, including when the new CloudSwitch technology will work with its portal. The company also needs to emphasize how customers will benefit from a cohesive suite that derives the best elements of each of the discrete solution sets.
All of Verizon’s chief rivals in the cloud need to respond to the CloudSwitch deal by noting their own respective commitments to building stable, secure, high-performing, and open on-demand services. Competitors such as BT Global Services that have long noted their desire to serve as a cloud broker to customers to create the most seamless and consistent on-demand service possible should offer up details of the work they are doing in this area and the investment they have already made.
Competitors such as AT&T that are actively developing cloud services to support things such as mobile or vertical-specific applications need to underscore their efforts to create highly advanced and very innovative on-demand services.
Existing Verizon/Terremark customers should ask their account managers for more information on how and when the CloudSwitch technology can benefit them, specifically with respect to simplifying the process of migrating on-premises applications to a hybrid environment. At the same time, clients should also expect Verizon/Terremark to provide more specifics about how its product portfolio will evolve as it combines the offerings of the two previously separate companies under a single brand.
Prospective clients that have dabbled in the cloud but have thus far resisted moving multi-tiered enterprise applications to an on-demand environment should give Verizon/Terremark a closer look. With the CloudSwitch software on board, transitioning an on-premises application to a hybrid environment could be a relatively straightforward process.
Overall, we are taking a positive stance on Verizon’s CloudSwitch acquisition, because the provider is acquiring technology from the deal that should make it easier for a business customer to transition multi-tier enterprise applications to an on-demand environment and move workloads between and among clouds. Not only will this help spur cloud adoption among customers that have held back because of concerns about having to reengineer existing applications, but it also gives Verizon, or more accurately its Terremark subsidiary that is delivering its managed IT services solutions, an important differentiator in a market segment where most on-demand offers still require customers to commit to a single cloud provider. At least in theory, the CloudSwitch technology, which is application and hypervisor-neutral and potentially cloud-agnostic, opens up the option for a customer to transfer workloads fairly easily not just between clouds, but also among separate provider environments.
If Verizon is able to embed the CloudSwitch technology effectively into its Terremark cloud services ahead of the competition, the resulting capabilities could give the provider an important edge over its rivals. The desire for greater agility than has been available in traditional outsourcing models is one of the primary benefits businesses seek from cloud services. In Current Analysis’ recent study of cloud adoption in North America, more than half of the enterprises surveyed said flexibility was a key driver in choosing a cloud solution over conventional outsourcing.
Although the CloudSwitch deal is another proof point in Verizon’s well-considered cloud strategy, the company still has quite a bit of work to do before it can declare a major triumph. Two months after Verizon disclosed plans to consolidate most of its managed IT services including the older Cybertrust acquisition with the acquired Terremark solutions, the company is still working on rationalizing the services to come up with a single catalog. Now, Verizon’s Terremark unit will have to turn its attention to integrating the CloudSwitch software appliance into its services and then packaging the solution set in a way that is easy for customers to digest.
Verizon has been clear that none of this will happen overnight. While we may have to wait a while to see how successful the company is in combining all these resources, Verizon has some very rich resources on which it can draw to create the kind of dynamic business-class cloud services that will not only stimulate market buzz, but also have the potential to attract enterprise buy-in.
About Current Analysis
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