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Verizon soups up cloud Computing as a Service

Telecom giant Verizon is adding advanced virtual networking and adjusting fee structures to its high-gloss, enterprise-grade cloud computing offering.

Verizon is adding "enterprise-class" features to its Computing as a Service (CaaS) and claims the cloud computing offering is a runaway success among enterprise customers, although it came up short on naming any of them.

Along with advanced virtual networking, the telco is adding the ability to customize operating system images and elastic bandwidth fees for users who have occasionally high throughput needs but don't want to pay for excess bandwidth capacity at other times.

Verizon said it will offer Verizon Private IP, giving users the ability to completely isolate their CaaS environments from the Internet and use only backhaul communications links, an attractive feature for enterprises that view Internet exposure as a downside in their IT environments.

"By addressing the high end, it certainly gives some validity to the market space -- people have been saying forever that no enterprise will want to do this," said Amy DeCarlo, principal analyst at Current Analysis.

She said that Verizon is hoping it can throw its weight around and capture enterprise customers who can appreciate the economic arguments for adopting cloud but can't get past the drawbacks of services like Amazon Web Services. She said the upgrades are a positive sign for cloud services.

"Verizon seems to be making some progress here," she said.

Verizon playing to its strengths
DeCarlo added that Verizon was conscious of the fact that it couldn't compete price-wise with other public cloud services like Amazon and Rackspace, so it was trading heavily on its control over both computing hardware and telecommunications infrastructure to differentiate itself.

For instance, Verizon will now offer connectivity up to 1 GBps and down to 20 MBps for customers who only have heavy traffic needs sporadically, avoiding payment for unused bandwidth.

"It'll be interesting to see if they are able, over time, to quantify how that works for customers, since many of their competitors aren't telecom operators," DeCarlo said.

Verizon CaaS users can also now customize virtual machine (VM) images and save them alongside stock operating system images, a key feature for creating scalable environments. In addition, Verizon has added support for Microsoft SQL Server 2008 and SUSE Linux, bringing the total choice of operating systems up to three -- Red Hat, Microsoft or SUSE.

Verizon's competition? AT&&, of course
DeCarlo says that Verizon is in a unique position but still faces competition, especially from other telcos that are pursuing similar strategies. AT&T's Synaptic Service is very similar to Verizon's CaaS, but prices are reportedly lower and AT&T has all of the same advantages Verizon does in delivering data and hosting computing resources.

"AT&T has quite a lot going for it in this space; Verizon is not alone in this," she said.

DeCarlo thinks that while Verizon and AT&T are definitely in it for the gun-shy enterprise customer right now, eventually they will compete more directly in the public cloud market. At this time, they have to justify the market and make money from large enterprises, but there's no reason that the $100 billion telecom giants can't eventually reap similar or better economies of scale than $20 billion retailer Amazon, especially since they control production and delivery.

"Something like 98% of customers are small and medium businesses, so they're going to look to go down-market," DeCarlo said.

What we're seeing is convergence finally becoming a reality.

Patrick Verhoeven, senior product manager of CaaS

For its part, Verizon claims it is adding two to three enterprise-grade customers a week in the last quarter of 2009, and the new features are a response to customer demand. The company said one of the largest auto firms is hosting its customer relationship management (CRM) application on CaaS but declined to name the firm.

"All of the new feature functionality is directly attributable to customer feedback," said Patrick Verhoeven, senior product manager of CaaS.

Verhoeven said that some new customers were smaller operations with IT-intensive businesses, such as medical firms that need HIPAA-compliant environments but want intermittent capacity, but the primary target is enterprise customers.

He added that Verizon fully intends to leverage its position as network communications and IT infrastructure provider to outmaneuver cloud providers that are at the mercy of their own ISPs.

"What we're seeing is convergence finally becoming a reality," he said.

Will Verizon gain enough momentum to really take on Amazon, which has a four-year head start, and AT&T, which has everything Verizon has, if not more? In the short term, it's unlikely, but experts agree that the market for cloud computing is still wide open; the eventual landscape of on-demand, easily available computing power is yet to be determined.

Carl Brooks is the Technology Writer at Contact him at

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