Verizon Hoping For Cloud Lift With CloudSwitch DealAugust 25, 2011
Wall Street Journal
by Scott Denne
Verizon Communications Inc.’s acquisition of start-up CloudSwitch Inc. is designed to help the communications company reap some of the momentum behind cloud computing.
Earlier this year, Verizon spent $1.4 billion to purchase Terremark Worldwide Inc., an operator of data centers, and the latest acquisition of Burlington, Mass.-based CloudSwitch will help it extend that business further into cloud computing–an emerging type of service, popularized by Amazon.com Inc., where computing capacity is delivered to customers on a metered basis, rather than renting an entire server.
“The game being played in the cloud is being dictated by what Amazon is doing, but we’re still amazingly early in the game, even though the hype would have you believe that everyone’s doing it,” said David Skok, a general partner with Matrix Partners, one of CloudSwitch’s earliest investors. “There’s an enormous opportunity to create an enterprise version of what Amazon is doing.”
CloudSwitch’s software enables Verizon’s Terremark to do that by offering customers the ability to move applications to and from Terremark’s data centers without any changes to the application itself. Not only does that capability open up new business for Terremark, but the technology and the expertise that it’s getting with this deal will enable it to improve the software that powers its own cloud service, Skok said.
Terremark built its business around enterprise clients and some of the world’s largest organizations, but those businesses have been slow to adopt cloud computing, unlike the small businesses and Internet start-ups that have flocked to Amazon’s cloud service. Software that CloudSwitch has developed and will continue to develop as part of Terremark, a Verizon subsidiary, will help it expand its clients beyond traditional data center services, like collocation, and into cloud computing, said Chris Gesell, Terremark’s chief innovation and strategy officer.
Though the terms of the acquisition weren’t disclosed, Skok said it was a great outcome for the CloudSwitch team and investors, and the decision to acquire the company involved people at the highest levels of Verizon’s management.
Founded in 2008, CloudSwitch raised about $15 million from Matrix Partners, Atlas Venture and Commonwealth Capital Partners. Its board included Skok, Atlas’ Axel Bichara and Elliot Katzman of Commonwealth Capital.