Verizon Acquires CloudSwitch To Beef Up Terremark Enterprise Cloud

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Verizon (previous CloudAve coverage) yesterday announced that they are acquiring CloudSwitch (previous CloudAve coverage), the Burlington based company founded in 2008 to make life easy for enterprises to extend their datacenter into the cloud, for an undisclosed sum. With this move, Verizon has made it even more clear that they are serious about the enterprise cloud play which first became evident through their Terremark acquisition. It was a great exit for a team of talented people who got Amazon on its toes regarding their enterprise grade security. I would even argue that it is CloudSwitch that pushed Amazon to innovate on their enterprise offering, Amazon VPC.

What is CloudSwitch, BTW?

To put it briefly, CloudSwitch makes it easy for organizations to extend their secure network perimeter into the public clouds. For a more detailed explanation, I will quote from my introductory post on CloudSwitch.

CloudSwitch is a software appliance that can be installed by the enterprises on a VMware or Xen environment and can be used to securely extend their datacenter to the public clouds. In spite of some of the problems that still persists in the public clouds (along with the FUD unleashed by those with stakes in traditional IT world), enterprises are very keen on trying out the public clouds. They may not put their mission critical workloads into public clouds yet but they want to push some of the applications into the public clouds in order to take advantage of its low cost and elasticity. There are many solutions that help enterprises push their applications to the public clouds. However, most of these solutions require enterprises to re-architect their applications and/or use new management tools. With it also comes issues like modifying the enterprise IT policies to fit in the cloud. What CloudSwitch wants to do is to extend the enterprise datacenter into the public clouds, like Amazon EC2 and Terremark, by tapping a technology used in the old days called network bridge (which operates at Layer 2 of the OSI stack). They took this technology along with layer 3 technologies to build a hybrid bridge that securely links the datacenter to the public clouds. This is somewhat similar to Amazon VPC but bridged much more deeply allowing enterprises to extend their datacenter IP addresses, MAC addresses, etc. inside the public clouds. Since CloudSwitch offers full encryption and isolation in the public clouds, it helps reduce some of the enterprise concerns about security in the public clouds. Even though CloudSwitch now supports only Amazon EC2 and Terremark, they are planning to add more cloud providers in the future.

Where does CloudSwitch fit into Verizon’s strategy?

Knowing Verizon’s cloud ambitions and their Terremark acquisition, one can safely speculate that it is more of a talent acquisition. If Verizon wants to grab the enterprise cloud marketshare, they would want the enterprises flocking to Terremark than any other public cloud providers. With this in mind, I don’t see a long term scope for CloudSwitch platform under Verizon as there is no business reason for them to support other competing public clouds. Clearly, Verizon sees value away from commodity clouds in their strategy to lure large enterprise customers and this is evident from the blog post by John McEleney announcing the acquisition (emphasis mine).

It’s clear that F1000 companies are looking for enterprise-class cloud services that cover a broad range of their needs – not only commodity clouds, but also higher levels of SLAs, enterprise procurement processes, professional services, security models and dedicated systems

With this strategy, there is no reason to believe that Verizon would want CloudSwitch technology to help commodity clouds get “enterprise status”. When I pushed hard on it, Ellen Rubin from CloudSwitch told me that they will continue to support other public cloud providers but she said the actual strategy will be clear once CloudSwitch teams gets a chance to sit with Terremark team to discuss their future strategy. I don’t see Verizon discontinuing the support for other cloud providers in the short term but I don’t expect them to keep this product alive in the longer term. Verizon’s cloud ambition is not the only reason for my suspicion. Amazon will definitely try to beef up their offering to “enterprise grade” without any support from their ecosystem partners. OpenStack is also seriously pursuing a network component which will meet the needs of enterprises on security. Any cloud provider betting on OpenStack will tap into this for their needs. Similarly, VMware has its own enterprise security strategy on the cloud. There is no long term relevance for the CloudSwitch platform in the market. Verizon will be smart to put the resources on improving their own public cloud offerings than continue to develop a platform that could support other public providers.

Conclusion

Either way, the acquisition is great for the talented CloudSwitch team. Even as they fade into the cubicles of Verizon, we cannot deny the fact that their technology is one of the reasons public clouds became palatable to the enterprises. Let me take this opportunity to congratulate the friends at CloudSwitch and I will be keenly following Terremark as they try to get large enterprises into public clouds.

Related articles

• Verizon acquires enterprise services provider CloudSwitch (venturebeat.com)
• Verizon Hoping For Cloud Lift With CloudSwitch Deal (blogs.wsj.com)
• Verizon Buys CloudSwitch to Boost Hybrid Clouds (datacenterknowledge.com)
• Verizon nabs CloudSwitch to pursue global cloud strategy (zdnet.com)
• Video: A Closer Look at CloudSwitch (datacenterknowledge.com)
• Verizon boosts cloud services with CloudSwitch buy (networkworld.com)
• Verizon buys CloudSwitch to give itself a software play (gigaom.com)
• Verizon Buys CloudSwitch, Targets Lock-In Fears (informationweek.com)
• Verizon boosts cloud services with CloudSwitch buy (infoworld.com)