Verizon sells cloud services unit to IBM

data center

Verizon has reached an agreement to sell off its cloud and managed hosting service assets to IBM, illustrating that it is backing away from the cloud services space.

This is quite a different turn of events for Verizon. The service provider had high hopes for being a major cloud and data center player when it purchased Terremark in 2011.

Just this week, Verizon completed the sale of its data center facilities to Equinix. Specifically, Verizon sold off 29 data centers and their operations for $3.6 billion in an all cash transaction includes over 1,000 customers.

Related: Equinix purchases Verizon's data centers for $3.6B, enhances interconnection portfolio

George Fischer, SVP and group president for Verizon Enterprise Solutions, said in a blog post that the sale is part of a broader effort to shore up its managed services strategy.

"It is the latest development in an ongoing IT strategy aimed at allowing us to focus on helping our customers securely and reliably connect to their cloud resources and utilize cloud-enabled applications,” Fischer said. Our goal is to become one of the world's leading managed services providers enabled by an ecosystem of best-in-class technology solutions from Verizon and a network of other leading providers."

Apart from saying it would work with IBM on various networking and cloud service initiatives, Verizon did not reveal any financial details. Verizon and IBM expect the acquisition to be completed later this year.

The service provider will notify affected customers directly, but said it “does not expect any immediate impact to their services as a result of this agreement.”

Selling off the cloud service assets should not be of any great surprise. In March 2016, the service provider shuttered two of its public cloud service offerings, a move industry watchers said signaled the challenges of being able to effectively compete against providers like Amazon Web Services and Google.

Verizon stopped offering its Verizon Public Cloud Reserved Performance and its Marketplace. The carrier gave customers the option to move their data to the telco's Virtual Private Cloud offering.

While this sale is a reflection that Verizon perhaps can’t hack being a cloud player, the service provider could perhaps realign its focus on further sharpening its traditional enterprise service portfolio. By purchasing XO Communications, Verizon will have a much larger arsenal of metro and long-haul fiber assets to bolster its ability to deliver Ethernet and optical services to enterprise customers.

IBM also stands to gain a lot from this acquisition, particularly in a market that Synergy Research continues has a strong growth pattern ahead. According to the research firm’s estimates, cloud infrastructure service revenues have now reached almost $10 billion and continue to grow at well over 40% per year.

While AWS, Microsoft and Google are the lead providers in Infrastructure as a Service (IaaS)/Platform as a Service (PaaS), IBM continues to lead in hosted private cloud.

It’s clear that IBM is serious about growing its cloud business. The company recently opened four new IBM Cloud data centers in the United States to support growing enterprise demand for cloud infrastructure that can provide access to services like IoT, blockchain, quantum computing and cognitive, for example.

IBM (Image: IBM)

By adding the Verizon cloud assets to its portfolio, IBM could now extend a wider array of cloud services to its global network of 55 cloud data centers.