The first half of 2011 has seen US telecommunications providers acquire cloud hosting companies at a remarkable rate. It began in January, when Verizon Business acquired data centre operator Terremark, a pioneer of scalable, cloud-based hosting services, for $1.3 billion.
Then Navisite was acquired by Time Warner Cable in January for $230 million, and in April, Louisiana-headquartered CenturyLink announced its intention to buy Savvis, the data centre hosting company that happens to be the UK government’s first confirmed cloud provider.
The attraction of cloud computing for telcos is clear – they already bill customers for network services on the basis of usage or monthly subscriptions, so unlike many traditional hosting providers they have an operating model that is ready to support utility computing services. Of course, there are many telcos that already offer data centre hosting services, and in the UK one prominent example is BT. Unsurprisingly, it has a number of cloud-related services on offer.
Launched last year, the company’s Virtualised Data Centre (VDC) offering allows customers to provision Hewlett-Packard- and VMware-based IT infrastructure through a self-service portal. It allows customer to provision infrastructure and on a month-by-month basis, but there is a three month minimum commitment.
According to Neil Sutton, vice president for portfolio at BT Global Services, the service is not aimed at customers who might want to spin up some extra capacity for 24 hours, but at organisations who are launching new applications for which they cannot predict demand.
VDC has attracted “tens of customers” so far, Sutton says, including law firm Norton Rose and Norfolk County Council. But there is a strong pipeline of interest, he says, especially among BT’s existing managed hosting customers.
BT also uses VDC to support some of its own ‘communications as a service’ offerings, including its hosted unified communications service, BT OneVoice. Here it is better established – IDC estimates that BT holds a 26% share of the global hosted IP telephony market.
And it also has various software as a service offerings in its portfolio that are focused on specific industry verticals. BT Radianz is a hosted information aggregation platform for financial traders, while earlier this year BT launch a hosted version of its Expedite retail application suite, also based on VDC.
Sutton believes the company’s established billing system is a boon when it comes to cloud computing. “Our billing infrastructure will aid us greatly in charging for these services, and we see it as a key corporate asset,” he says.
However, he also acknowledges that BT – like much of the industry – has yet to adapt fully to a utility services-based business model. Software licensing is an area that it is still working on, he says, as is salesforce remuneration. “We do need to think about how we reward our sales people differently.”
Another reason why cloud computing services are a good fit for telcos is that the quality of those services is heavily dependent on the network, whether it is the public Internet or a virtual private network (VPN).
“The biggest headache for customers moving to cloud services is the degradation of the end-user experience,” says Sutton. “I’ve come across companies that have seen response times go from five seconds up to 35 seconds [after systems were moved to the cloud] because they haven’t considered the network.”
However, BT’s advantage in this regard is not the fact that it owns and manages much of the UK’s network infrastructure. Instead, Sutton says, improving the quality of cloud services is – in part at least
– a matter of using application performance management technologies such as Ipanema and Riverbed. Is that not something any company could do? “They could,” says Sutton, “but most lack the expertise to do it well.”
So while BT’s telecommunications background does give it certain advantages when it comes to cloud computing, the UK cloud market is by no means an open goal for the company.