Verizon Sells its Cloud Business to IBM
Verizon announced that it will be selling its cloud business to IBM to help boost the buyer’s presence in the cloud market. The terms of the deal were not disclosed, so we don’t know the exact amount that transpired in the deal.
This is surprising news for many reasons. In February 2016, Verizon said that it wants to continue providing top quality cloud service to its corporate and government customers, and to this end, it is making substantial investments in the cloud business.
But, by end of 2016, it sold 29 data centers to a company called Equinux for $3.6 billion. Right after that, this news that it has sold its cloud and managed hosting services to IBM.
With this deal, Verizon has completely quit the cloud business, though it announced that it will be working with IBM on a range of strategic issues and initiatives. Again, the exact detail of these initiatives have not been disclosed.
So, what prompted Verizon to sell its cloud business and come out of the industry altogether? The answer may lie in the history of its cloud business.
Looking back, we can say that Verizon’s cloud business had a rocky start. It put together a new division after it acquired an offering from Terremark. It built too much on it too quickly as it moved its VMware to Xen. During this time, it also started a new object store and a block store. There was also a compute service that was offered for some time, but it was closed down in February of 2016 because Verizon wanted to focus on its virtual public cloud.
The message throughout was patchy and disorganized. One of the senior brass in Verizon, George Fischer, said that the company had ambitious plans for its cloud division as it wants to become the world’s leading managed services provider. To achieve this lofty goal, it wanted to created an eco-system using the best technology solutions from Verizon and other service providers. Within a few months though, the company sold its data centers.
Not sure what happened in the company during this time for such wild transitions and the gap between its actions and statements made by the top management.
IBM is silent on this deal. There has been no statements whatsoever from this company, though it is the one that stands to gain the most from this deal. IBM is one of the top players in the cloud market, but it is trailing heavily behind Microsoft and AWS. Google is also fast closing in on the cloud market.
To compete with these players, the infrastructure and client base it has obtained from Verizon can give it a big boost. Already, the company is making rapid strides in closing the gap, and this deal can further bolster these efforts.
In some ways, this is better for everyone because a few large players sharing the market is way better than a ton of small players who fight with each other for market share. Such a trend is healthy for the industry as a whole.