With Terremark in hand, Verizon focuses on cloud

May 6, 2012

Verizon and Terremark started as partners on a General Dynamics-led team to provide cloud computing services to the Army. By the time General Dynamics announced the award earlier this month, Verizon had bought Terremark, giving it a larger infrastructure as it pursues more cloud work.

The federal cloud computing environment has become ever more competitive as traditional government integrators and IT contractors go up against commercial providers shifting into government work.

Telecommunications companies are seeking a greater share, making acquisitions designed to boost their cloud computing credentials. Verizon, which has its federal office in Ashburn, bought Terremark — with a federal office in Herndon and a data center in Culpeper — last year in a roughly $1.4 billion deal.

The move is part of a company-wide shift to make cloud a primary capability, said Susan Zeleniak, Verizon’s senior vice president for public sector markets.

“It’s a real transformation on the part of our company,” she said. The Terremark “procurement was not ... by accident. It’s really where the company is moving.”

Under the Army deal with General Dynamics, which is worth up to $250 million over five years, Verizon and Terremark will provide infrastructure — including servers, networks and storage — for the Army’s move to the cloud.

Jillian E. Mirandi, an analyst with Technology Business Research, said other telecommunications companies are similarly using acquisitions to improve their position in the cloud computing market.

Monroe, La.-based telecommunications provider CenturyLink, for instance, last year picked up St. Louis-based cloud company Savvis.

Mirandi said Terremark will give Verizon a leg up on the federal market, noting that almost one quarter of Terremark’s business was already with the government.

But Mirandi noted that many big IT companies known for other strengths — such as Amazon and Google — have also become major cloud computing players in the government market.

“Vendors who come from all different backgrounds [are] really getting into government contracts,” she said.

Verizon previously had experience running data centers available for use by other companies as well as the government, but turned to Terremark to provide greater scale and a larger data center footprint, Zeleniak said.

“It just seemed like we needed to accelerate our build of that infrastructure,” she said. In August, Verizon also picked up CloudSwitch, a Burlington, Mass.-based company that specializes in moving applications to the cloud.

At the same time, she said government customers have increasingly sought more comprehensive purchases, hoping to buy an entire system from one company rather than juggle multiple contractors each specializing in a different task.

“This is a very competitive environment,” Zeleniak said. “I think that we will carve out our space.”

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