Telcos Still Muscling Into the Cloud

As expected, Savvis was acquired this week. And as expected, it was acquired by a telco – CenturyLink, the third largest telecommunications company in the U.S. There’s very little to say about this acquisition that wasn’t said earlier this year when Verizon acquired Terremark and Time Warner Cable acquired NaviSite.

“Verizon and Century Link have made it clear that telco’s are attacking this market and both have gone the acquisition route,” writes Gartner analyst Kyle Hilgendorf. Hilgendorf writes that Gartner has found that the biggest technical problems enterprises migrating to IaaS face are “network performance and latency issues (not to mention non-technical legal, transparency, and availability concerns).”

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“Telco’s are in ideal positions with their global network to solve these network issues faster than more traditional hosters or software companies,” he writes.

Chuck Hollis, vice president of global marketing and chief technology officer at EMC, told us when Verizon acquired Terremark:

If you believe in the secular trend that — over time — more IT will be delivered as a service vs. consumed in a traditional fashion, you quickly realize that telcos can have a compelling position.

They’ve got lots and lots of pipe. They know how to deliver a related form of service — communications. They know how to price their offerings and bill for them.

Their strategic motivations are usually clear as well. More ordinary network services are quickly becoming commoditized. There’s only so much content you can sell people. And, before long, you go looking for the next big market to attack.
Indeed, early on, many people thought that IT-as-a-service would go to the telco carriers, and that would be that.

Earlier this month, CenturyLink completed its acquisition of Qwest, which was already in the cloud game.

In its Magic Quadrant for Cloud Infrastructure as a Service and Web Hosting, Gartner positioned Savvis as the market leader, kicking off a mini-controversy about which companies were and were not included.

Rackspace must be getting some interesting offers right about now.

Disclosure: Qwest Business, now owned by CenturyLink, is a ReadWriteWeb sponsor

Photo by Nicholas Smale

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