Uncommon Wisdom

Oct 4 2010   11:59PM GMT

What does Verizon’s data center spending tell us?

Tom Nolle Tom Nolle Profile: Tom Nolle

Verizon announced it would be making a major investment in data centers for cloud computing, among other things. The major investment is that it will be adding space for more than 5,000 servers and expanding to about 200 data centers worldwide, including sites in Australia and the UK.

While “the cloud” gets a lot of play in this deal, it’s really more about enhanced services and a shift in Verizon’s profit model from selling bits to selling experiences. A couple decades ago, new services meant new network equipment. These days, it means servers and software, and at the moment, it’s being driven by a rush to create a meaningful strategy for content delivery and monetization. While that’s the hottest issue in the market, it’s an example of the broader issue of generating revenue in an age where transport and connection matter a lot less.

The next generation of carrier “services” will be customer “experiences.” The foundation of experiences is software, running on a connected set of data centers — a cloud.  But media hype about the value of the cloud has been several miles wide and a lot less than an inch deep. Most operators would echo the Pacnet exec quoted in a recent article — he’s glad he’s not the only one working through the fog of the cloud.

For operators, in particular, the imprecision of “cloud” is a challenge because they want an architecture on which to build their infrastructure plans. They had that for networks, and now they need it for clouds. All those data centers need to be filled with gear, and how that will work and how it will make money are now the critical question for operators — and vendors.

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