Kerry Bailey, Group President, Terremark Worldwide
While there's certainly a lot of hype around cloud services, Verizon Business is bullish on the capabilities cloud can bring to its enterprise customer base. To advance its cloud services vision, Verizon (NYSE: VZ) has made two significant acquisitions since the beginning of this year, including Terremark and, most recently, CloudSwitch. Heading up Verizon Business' cloud efforts via its Terremark subsidiary is Kerry Bailey, Group President, Terremark Worldwide Inc. FierceTelecom Editor Sean Buckley recently caught up with Bailey to talk about opportunities in the cloud services space and Verizon Business' outlook.
FierceTelecom: There's a lot of talk about cloud services these days, but from your perspective what's the actual outlook and opportunity as seen by Verizon and Terremark?
Kerry Bailey: We do fundamentally believe that this is a new way of how IT is being delivered and is going to be delivered is a pretty transformational movement in the market. We do fundamentally believe in cloud. It's got a lot of hype around it, but this whole idea of how consumer and enterprises will acquire resources will be in a pretty big change, and yes that's called the cloud. We also believe that it started off in the consumer world, or the commodity areas of being able to benefit from the ease of use of IT for consumers, and is moving into enterprises now. That will help enterprises take advantage of this big change of how IT is being delivered. We also believe that the network resource--both wireless and wireline--is fundamentally what the cloud is and that putting those IT resources on public and private networks is the way that we'll continue to differentiate ourselves. When we went into this big bet on cloud, we also knew it is still in this early stage, but we knew that security, performance and being able to help enterprises migrate to this delivery model was required.
We moved all of the Cybertrust resources we acquired in 2007, our data centers and our professional services team, and coupled them with Terremark. All of those elements have to come together to enable that. We're starting as a company that knows how to deliver enterprise quality and enterprise class and we'll bring that to the cloud. The last piece is, we also fundamentally do not believe that every application will move to the cloud. The reason why we set up our strategy here at Terremark and Verizon is that as CIOs are looking to take advantage of this movement of their applications into cloud environments, they will find as they rationalize their applications that some will be ones they have to have in colocation centers, some will be in hosting environments, while others are a perfect fit for the elastic of the cloud model. That's our view. You have work with customers to look at the applications and figure out which ones are right for each of the delivery models, whether it be colocation, hosting or cloud.
FT: Okay, so there are many definitions of cloud out there, but how do you define it from a Terremark and Verizon Business perspective?
KB: We love the idea of what cloud is: it is the ability to have such an ease of use in deploying IT services. The fact that it can scale; the fact that it's simple to bring up an environment in minutes instead of days or weeks; and that it's a utility model in that you pay for what you use and it can flex with you. There are just so many companies, especially as they go into new business models to deliver video and delivering consumer services, they need to scale and move with demand and cloud has just been able to do it. I think the issue around cloud is this idea that there are commodity clouds that are trying to work their way into being enterprise clouds, but there's a chasm that needs to be crossed that sits between the commodity clouds and something that's truly enterprise class. We think with Terremark we filled that chasm and we're working hard with the enterprises as they move those applications to the cloud.
FT: Speaking of Terremark, how important was that acquisition to expanding Verizon's overall cloud strategy and do you see it as significant as your previous acquisition of Cybertrust, which gave you a foothold in the managed security sector?
KB: There were several things we fundamentally saw moving in the industry and we had the assets to get there, but we also had some gaps. If you think about Verizon's world class global network and services, we did acquisitions and built organically several different pieces to get what I call a market moving in our direction which is applications and services that are sitting on top of a network. When we did the Cybertrust acquisition, we said we needed to hold a number one leadership position across the regions of the world and have a full functioning security portfolio that included everything from identity and access management to threat and vulnerability services.
We also knew as more and more applications come onto the network, you need to have professional services capabilities so that you can have an advisory relationship with customers and help them move their business to the network and these centers. To do that, we built these capabilities out four years ago and then we took a big focus on building out verticals. As the utility, energy and healthcare verticals were changing, we needed people that understood those markets as well.
When we added Terremark it filled in a big federal capability for us in the IT solutions area and filled a large gap we had in Latin America. If you bring those pieces in, we said that now, combined with 4G wireless, you have all of these capabilities of this market that's moving in our direction. In addition, as we combine all of the assets under the Verizon/Terremark solutions under the Verizon company brand, we are an IT solutions company with a powerful network. We have taken the Terremark brand, which is more IT-centric brand, and coupled that with a network brand called Verizon. Because Terremark is a Verizon asset, they will be leveraged by the wireless team for new services such as machine to machine (M2M) cloud, consumer wireless clouds, and for our own internal IT to run Verizon's internal applications. We're using it across consumer, retail and across markets, including telecom, to transform our business.
FT: There are a lot of service providers jockeying for cloud service position by acquiring other cloud and data center service providers, including CenturyLink (NYSE: CTL) purchasing Savvis. Do you see this cloud acquisition trend continuing and what do you think is driving it?
KB: I think you have a couple of things going on right now. If I pull way back and look at all of the industry segments, everyone right now understands this is a very large change in the IT industry. You have seen hardware companies buy services companies; you have seen applications companies putting up Software as a Service (SaaS) environments; and you have seen systems integrators set up capabilities around cloud service.
In the telecom industry, you have seen Verizon kick off the cloud service acquisition trend with Terremark. First, the whole market is rushing toward this change of how IT is being delivered. That creates a disruptive time for everyone. I think those with the right assets and (that) can scale will ultimately be the winners in this space. We believe having the 3G and 4G wireless networks connected to the cloud is the biggest trend going on out there and those are the assets you have to have. You need to have the data centers, the global wireline networks, the wireless assets, the security capabilities, the global wireline network and wireless assets. Those service providers that can put that together and truly deliver against an enterprise-class environment will ultimately be the winners.
FT: In considering cloud services, what are your enterprise client's main concerns? Is it security? Is it reliability? Or is it all of the above?
KB: You have a couple of things. The first thing, believe it or not, is education. Anytime you get into a change in a market or an industry like this there's a lot of confusion on exactly what is the cloud. Everything from consumer up to enterprises there's confusion. When we go to see the CIOs in the global 2000 companies, the first set of questions is: What is it? Is it secure? And will it perform?
Once you get through the education, you get into security and performance. I think that's the biggest question on the CIO's mind right now ... security and performance, because they've heard a lot about commodity cloud that got developed and there's great benefit to this. That's where the uneasiness happens. Can it handle PCI data, and is it FISMA compliant for the federal government? That's why I say there's a chasm that has to be crossed.
FT: The other debate that's raging in the cloud services arena is whether to go with private, public or a hybrid cloud implementation. Does the adoption of these implementations depend on the specific user or are there other factors involved?
KB: Our view is that cloud itself has forced CIOs to do application rationalization. When they do that they begin asking what the right environment for these applications to sit in. Our view is a lot of those commodity applications that don't create a differentiation for a company, are moving to the public cloud. The question then becomes, 'there's other applications that should sit in the private cloud. I don't want anyone else on that platform, but I want cloud economics and have the flexibility on how to provision that private cloud and make it work.'
Finally, you get into the enterprise that says, 'I have a lot of environment where I am not moving to either public or private cloud so I want to put it into a hosted or colocation environment.'
FT: Verizon Business and Terremark, in addition to serving a number of large enterprise customers, also serves the government. Do you see the U.S. CIO's cloud first strategy as a catalyst for other industry segments to possibly follow in moving into the cloud?
KB: If you look at growth today, so much of it is coming out of the federal government. You have to have a compliant underlying infrastructure, which is why you have FISMA compliance. The government is facing these billions of dollars in IT costs and see the economics of moving to the cloud so the "cloud first" initiative come out, which said they have to put their first three applications in the cloud. We're actually seeing that accelerate.
As a government agency comes onto our cloud, you start seeing applications usage expand and you see the full suite. We actually believe the government adoption of cloud is moving faster sometimes than the enterprises, but they want economics of the cloud, ease of use, and what held them back in the past was making sure the environment FISMA certified and can run at the government standards.
FT: Taking a look into the crystal ball for the rest of 2011 and 2012, what are the main goals and plans for Terremark?
KB: From an industry perspective, I think we're still at that early stage, but the enterprise adoption of the cloud is accelerating. We deployed our cloud environments around the world and we're going to help enterprises move into these environments.
From a specific goal perspective at Verizon, we're a strong believer in cloud and you'll see the adoption of cloud services go all the way across Verizon. You're going to see things like M2M cloud come into fruition, and you'll see our consumer clouds come into play and the integration of our wireless devices into the cloud. We're going to tie those Verizon assets together with the Terremark assets that show this is a large bet for us and show that we're going to not only operate our business in it, but also drive the adoption of services we have coupled with all of our assets. It will be a fundamental large revenue stream for us.