Verizon's future is in the clouds

June 10, 2011: 12:26 PM ET

Verizon's chief cloud strategist discusses where the communication giant's cloud business stands today and where it's headed.

FORTUNE -- Verizon Communications is best known for operating cell phone networks and fiber-optics-based TV and Internet offerings. But over the last couple of years, the company has made a big push in cloud computing services, which it says is key to future growth. That's why, last January, the New York-based carrier shelled out $1.4 billion to buy up cloud provider Terremark.

With the acquisition under its belt, Verizon (VZ) says it's uniquely positioned to become a leading player in this booming industry. But it's not the only one betting big on the cloud -- so is everyone from Hewlett-Packard (HPQ) to rival operator AT&T (T). And then there's Amazon (AMZN), the as-of-yet undisputed leader in renting out server capacity. Compared to Amazon, Verizon is late to the game. So how does the carrier plan to catch up? I recently spoke with Chris Gesell, Verizon's chief cloud strategist, to find out where Verizon's cloud business stands today and where it's headed.

Why should companies choose Verizon's cloud computing platform?

We understand and manage global infrastructure and capacity -- we've already proven this skill in managing our global networks. And we have the global data center assets to provide our cloud platform internationally. Just look at where our cloud is deployed today -- we're already global. Also, this is a capital-intensive business, you need to build in advance of your customers being there. And we have the assets to do that.

What cloud services do you offer today?

About three and a half years ago we started contemplating the notion that IT was going to be moving towards a delivery model where customers pay for what they use. Now we've been in market for two years with the Verizon cloud computing offering. We've had our cloud platform deployed in multiple locations in the United States, Europe and Asia. With the recent acquisition of Terremark, we expanded our presence and added Latin America. We offer infrastructure as a service. But we haven't yet launched the classic definition of cloud storage capabilities -- you'll be hearing more about that in the coming weeks.

Who are your customers?

We've targeted large enterprises, government and medium-sized businesses. But with the Terremark acquisition we have the full suite of customers, from small to large. Customers include Mitsui, CA Technologies and GWR Medical.

Who do you consider your biggest competitor?

Amazon was the first to market and is generally recognized as the largest revenue generator in the space today. But I think you'll see other companies entering this market. AT&T, from our view, is a couple of years behind us.

Why did you acquire Terremark and what are your plans for the subsidiary?

The Terremark acquisition was complementary to Verizon's current business. We were servicing enterprise customers and had data center customers around the world. But now this rounds out the portfolio nicely and helps give us high-growth markets in Latin America. We'll be talking more in the next few weeks about how we're going to bring these two businesses together.

Is the cloud key to Verizon's future? What kind of resources are you putting on these efforts?

It's absolutely an integral part of our future. Go look at the size of the Terremark acquisition if you want to see how important it is for us. That is a significant move. We spent many years building a strong brand in the consumer world but cloud is certainly critical to our growth and strategy.

Does the move towards being a provider of cloud infrastructure pose challenges for a company used to selling cell phone service?

We have a long track record here, as Verizon has focused on the business segment for years. In fact, about 96% of the Fortune 500 are already customers that are doing business with Verizon. So we've been participating in the IT segment for a long, long time. And as this market evolves we feel that the cloud delivery model puts us in a better position than before to be in the IT market.

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About This Author
Michal Lev-Ram
Michal Lev-Ram
Writer, Fortune

Based in Silicon Valley, Michal Lev-Ram covers enterprise and mobile technologies for FORTUNE. Prior to joining FORTUNE, she wrote for CNNMoney, Fast Company, Popular Science and other business and technology publications. She was also a staff writer at Business 2.0 and holds a B.A. in journalism from San Francisco State University.

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