Telecoms Consider Ditching Data Centers To Stay In The Cloud Race

In an effort to stay in the lucrative -- and competitive -- cloud business, some telecommunications providers may be looking at whether offering cloud services can be done without owning expensive data centers.

Some carriers are starting to shop around their physical data center assets, a trend that is being attributed to cloud industry heavyweights such as Amazon and Microsoft putting the pressure on telecom providers that also are offering cloud services.

It's hard to compete with cloud giants like Microsoft with Azure, Amazon Web Services and Google, said Darryl Senese, vice president of carrier services at Atrion Networking, a Warwick, R.I.-based IT solution provider.

[Related: CenturyLink Considers Selling Its Data Centers: What Would That Mean To Partners?]

"These three [cloud providers] are taking such a lead in this space that a lot of the larger [telecom companies] that have data center and cloud practices are almost succumbing to those leaders," he said. "[Telecom companies] are focusing on other ways to connect to these major cloud platforms and offering services for business customers to connect, rather than trying to compete."

CenturyLink said earlier this month that it would be exploring options for its data center operations and co-location business that could include the sale of some or all of its data center facilities. Verizon last week also was rumored to be considering a sale of its business unit that would include its Terremark assets, its cloud and data center unit the company acquired four years ago. Such a move has not been confirmed, however.

Telecommunications provider Windstream, meanwhile, sold off its data center assets to TierPoint, a data center and co-location provider, for $575 million last month.

Atrion Networking is aligned with both providers, so the sale didn't impact business. However, it allows companies like Atrion to take advantage of TierPoint's expertise.

"They have more to offer because [data center and cloud] is all TierPoint does, while Windstream does telecommunications and wireline as its core business. I think it's a win-win for everyone," Senese said.

The trend toward carriers selling cloud services without owning data center facilities is well aligned with the value proposition of the cloud, said Andrew Pryfogle, senior vice president of cloud transformation for Intelisys, a Petaluma, Calif.-based master agent that partners with many carriers.

"There are tons of very robust cloud providers out there that don't own a single data center because they leverage the assets of others in an on-demand, pay-as-you-go model, and that's smart," he said.

Offloading data center assets could be a benefit for telecom providers because it frees them up to focus on cloud applications and support, instead of running and operating data centers, Pryfogle said.

For some carriers that may be considering moving out of the business of data center operations, the timing may be right for consolidation, he said.

"There's an appetite there from data center operators to acquire additional assets, and timing is everything," Pryfogle said.

PUBLISHED NOV. 11, 2015