Rumors have it that Verizon is going to sell its network of 48 data centers for $2.5 billion.
Reports of the planned sale emerged this week, with no indication as to why Verizon might be doing so.
While there are all kinds of possible reasons behind the move that have nothing to do with the marketplace — like a need for cash — talk that Verizon planned to sell its entire enterprise business have been making the rounds for a while.
Who Might Buy?
Whatever the reason, the availability of 48 established data centers in an enterprise space that is struggling to manage increasingly large amounts of data must seem too good to be true for big data gorillas like IBM, Microsoft and Google.
All three have deep pockets and have been developing their portfolio of data centers over the past two years. They are also making a serious Internet of Things (IoT) play that will require more data infrastructure and storage in coming years.
Tony Byrne, founder of the Real Story Group, suggests one of the reasons behind the possible sale is that enterprises are no longer willing to take all their technology from the same vendor.
He pointed out that enterprise customers are getting more sophisticated about how they outsource application and data hosting.
“Customers, especially larger enterprises, are less apt today to want to purchase a bundle of telco, managed hosting, security and other services in a way that Verizon might sell to them as a package,” he told CMSWire.
“Instead, they are increasingly looking for value and specialization. From a hosting perspective, you're going to find value and specialized services — along with a large ecosystem of third-party capabilities like app monitoring — among the major cloud players.”
This appears to be a common theme in the wider enterprise technology, and not restricted to cloud computing or data storage.
He says the same thing is happening in the web content market, where vendors who used to provide managed hosting services from their own data centers are now increasingly outsourcing that capability to one of the major cloud providers.
Too Much To Handle
For Forrester analyst Sophia Vargas, the possible sale is in keeping with an emerging trend in the co-location industry — where co-location is the business of renting data equipment, space, and bandwidth to enterprise.
Although many telecommunications vendors moved into the space around 2010 — Centurylink, Verizon and Windstream bought Savvis, Terremark and Hosting Solutions, respectively — they are now starting to pull out.
In fact, all three companies plan to sell some or all of their assets. The gamble didn’t pay, it seems.
“While telcos had arguably given birth to co-location, the fact remains that network and carrier providers have had troubling competing against pure play co-location and data center service providers like Equinix and Digital Realty,” Vargas told CMSWire.
“In the past, telecom providers described co-location and data center services as a way to enrich existing customer contracts. In an interesting twist, these new intended divestitures have been presented as a way to refinance core assets, focus on what drives their business and move away from standardized services with high overheads.”
It also becomes more complicated to manage data centers and infrastructure in a world that is moving to hybrid cloud computing.
Enterprises, Vargas, says are increasingly moving towards a data management scenario where their data is distributed across owned, col-located, and cloud environments. Owning data centers is become complicated and probably not wort the trouble if it is not your principal business.
Why would someone want Verizon’s data center business?
Offering cloud services requires mass data infrastructure and storage investment. Companies like Microsoft, with Office 365, or Google, with its Google Apps for Work, all need big data center investments, particular for their customers that do business in several geographies and are struggling with data sovereignty.
The IoT will also add to the attraction of Verizon’s data center business. The IoT promises to create data nightmares for enterprises that have jumped on board without preparing their data infrastructure.
Brian Lavallée, director of Solutions and Technology Marketing at Ciena, outlined what he believes data center providers need to look at if the IoT is to offer any kind of competitive advantage. He lists five elements in particular, which the Verizon portfolio could offer:
- Data Center Interconnect: To derive all the benefits of advanced analyst and big data sets, it must be possible to connect all data centers and transfer data around them at will
- Computation: To make the best of the IoT data requires massive storage and computing capabilities that the Verizon centers could provide
- Storage: cloud-based storage provides flexibility, scalability, compliance and architecture to support the unlimited influx of data that the IoT will provide
- Availability: An established and reliable network between centers will help eliminate connectivity concerns of data center operators and ensure mission-critical data is always available
- Security: Moving data between centers in the same network provides better security than transferring data between data centers on different networks
If the deal goes ahead, it is likely that the next time we hear about the data centers will be to announce who the new owner is and what they are going to do with them.
Given the advantages that such an acquisition would offer, it also seems likely that there is a number of different interested parties now stirring the mix. Who finally buys should be known soon enough.