Verizon, Time Warner Acquisitions: Harbingers For Change, Cloud Consolidation


 

The drive for large providers to become cloud players is sure to spar more industry consolidation. Time Warner striking and snagging NaviSite just days after Verizon bought Terremark is a key indicator of that.

"This will certainly drive consolidation within the cloud and infrastructure services market," Cohen said. "For example I wouldn't be surprised if you see a few of the major hardware players branching out into the cloud service provider realm with some strategic acquisitions. The reason is simple, the desktop is dead. The main conduit for software has become the Internet. The line between software provider and infrastructure provider has quickly become blurred."

And there are some cloud providers that are ripe for the picking. Alvarez suggested that St. Louis-based Savvis should be dressing itself up for sale and could be a potential target for AT&T or another service provider or cable company. Other potential acquisition targets getting mentioned include GoGrid and Rackspace.

"I think consolidation will happen overall, particularly in the tier 2 and tier 3 regional service providers," she said. "It becomes much harder for them to compete and either become a broker for AWS [Amazon Web Services] or get acquired. Service providers and hosting providers with the right skills, like BlueLock, for example, look very appealing as acquisition targets."

For Verizon, the Terremark acquisition also bumps up its cloud profile, giving it an established infrastructure as a service player with a presence in Europe and Latin America and also giving it an edge into federal cloud accounts, which are expected to see immense growth in coming years.

"It certainly brings [Verizon] up a notch," Alvarez said. "Quite frankly, they were getting no traction. Terremark and Verizon share federal government customers, they were already partnering together for Verizon CaaS for SMB service, it made logical sense for them to buy before someone else did."

Cohen added that Verizon's $1.4 billion bid for Terremark was a small price to pay for a money-making, innovative company that has strong growth potential.

"They underpaid if anything. Also given the recent U.S. federal government cloud deals -- some are estimating in the billions -- this will prove to be a really smart move for Verizon," Cohen said.

He added: "Verizon has struggled as a cloud provider, this will certainly give them additional credibility and a team of very smart and knowledge cloud architects. The key here will be to allow Terremark to continue to operate as they always have without corrupting their corporate culture or stifling their innovation."

The question that remains is whether service providers like Verizon and Time Warner Cable can integrate cloud computing services and offerings into their traditional offerings. Appirio's Nichols said time will tell if they mix like "oil and water."

"Will we see more of it? Probably," he said. "What will remain to be seen is if it's possible to maintain a cloud business like this when it's so disruptive to the traditional model."

 


See the latest cloud technologies, learn best practices, and interact with your peers at the channel’s first all-inclusive cloud event: NexGen Cloud Conference & Expo, December 4-5, 2014 at the San Diego Convention Center. Register now at  www.NexGenCloudCon.com