October 8, 2013

Verizon (VZ-NYSE) has launched its enterprise public cloud offering, underscoring that the basic public cloud (plain vanilla compute and storage offerings) is looking increasingly like a cost of capital play.

Verizon has built this broadly focused enterprise offering by scaling up capabilities at two acquisitions (Terremark and Cloudswitch) and adding CapEx/balance sheet heft. This offering is aimed squarely at Amazon’s AWS and Microsoft (Azure). The reaction of Google (Compute Engine) will be interesting. It remains to be seen whether Rackspace will be able to compete against these well-financed giants in the plain vanilla enterprise public cloud.
It is interesting to note that, perhaps in recognition of the inevitable pricing pressures, Verizon’s offering will ultimately be built on community open source software (i.e. not open source software maintained by a firm) and low-cost, unbranded server hardware. Verizon is also embracing a supporting network architecture that is software-defined. This will have significant implications for equipment vendors such as Cisco.
Cheverny also believes that this Verizon announcement will reinforce an industry trend towards operators with less-than-giant scale focusing on private cloud, integrated hybrid solutions, managed services and other value-added offerings.