Hot on the heels of Verizon’s acquisition of Terremark comes the $3.2 billion purchase of Savvis by CenturyLink, signaling that the rush to be an enterprise cloud leader is on.
It seems that during every major shift in the telecommunications, service provider or hosting market there is a string of moves like these as players attempt to capitalize on the change to gain greater market position. And there are plenty of investors caught up in the opportunity who are willing to lend a few bucks.
In the dot.com period, through 2000s, we saw major shifts in the service provider landscape as colo/hosting giants were created such as Cable & Wireless and Equinix.
But what does this mean for infrastructure & operations professionals looking to select a hosting or Infrastructure as a Service (IaaS) cloud provider? The key is in determining if 1 + 1 actually equals anything greater than 2.
If you are looking for hosting or managed services both CenturyLink and Savvis pre-merger provide credible capabilities in the market. CenturyLink brought the hosting capabilities from its recent Qwest acquisition along with some early IaaS offerings (Qwest, by the way, grew to a Midwestern U.S. telecom and hosting giant through rollups of its own during the dot.com period).
Savvis, primarily a colo and managed services company, has in recent years been establishing credibility as an IaaS provider with its Symphony solution. Like Verizon-Terremark, the combined CenturyLink-Savvis will need to - fairly quickly - consolidate their competing offerings into a single portfolio.
If you are a customer of the losing solution, you will be facing a migration eventually. That’s 1 + 1= less than 1 for you.
On the flip side, if you are a global enterprise managing multiple hoster and collocation relationships in order to cover the globe, you can now potentially tap into CenturyLink’s combined 2 million square feet in 48 data centers around the world and consolidate links onto a common fibre network spanning 190,000 miles. If CenturyLink’s new combined geographic footprint matches your needs that’s 1 + 1 = big savings.
The real winners here aren’t enterprise I&O professionals but the providers themselves as they gain access to a much larger combined customer base. And, the theory goes (see if this sounds familiar from the dot.com era) that the larger customer base will lead to greater overall revenues (both because of volume and from offering a wider set of services and geographic reach to each existing customer).
These greater revenues will drive further investment and expansion so better services can be provided to you more rapidly and thus propelling the company into a global leadership position.
Could happen. But we could also see these roll ups result in a significant build up of debt against optimistic forecasts for a market that might not grow as fast as predicted. We saw such overzealous moves and blindly optimistic investments during the dot.com period that created massive and ultimately unsustainable providers like Worldcom, @Home, Global Crossing, Exodus and Windstar.
We aren’t saying CenturyLink will fall into this trap or that their investment smells of similar excess, we’ll leave those assessments to the investment community. What I&O leaders should consider is whether this rush to cloud benefits their outsourcing and IaaS strategies. For each, the answer will be different.
Where are you in evaluating your outsourcing and IaaS strategies today?
Forrester Analyst Bill Martorelli contributed to this report.
Posted by James Staten