Verizon Enterprise chief: We're headed for cloud computing's A-list

President John Stratton says ability to build infrastructure at scale presents huge opportunities for Verizon in mobility, security, Internet of Things

In the battle for the next generation of enterprise IT, John Stratton carries a lot of weapons. Stratton is president of Verizon Enterprise Solutions, the nearly $30 billion unit formed just over a year ago to deliver networking, cloud, mobility, managed security, telematics and a host of other services in a more coordinated fashion for Verizon's top enterprise buyers. Building on a traditionally strong base of wired and wireless network services, Verizon Enterprise also blends in acquired assets like cloud hosting company Terremark, security company Cybertrust and Hughes Telematics. In this installment of the IDG Enterprise CEO Interview Series, Stratton spoke with Chief Content Officer John Gallant about Verizon Enterprise's progress since its inception, including a dramatic streamlining of internal systems and processes designed to make life much easier for the company's customers. Stratton also discussed the company's suite of services aimed at simplifying life for IT teams struggling with mobility and the influx of consumer devices, and he talked candidly about the prospects for a third mobile platform to rival Apple's iOS and Google's Android. He also talked about how cloud is reshaping the IT landscape and hinted at a series of major upcoming cloud announcements from Verizon Enterprise. Also, he explained how the "Internet of Things" is creating powerful new business opportunities for Verizon and its enterprise customers.

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From a Verizon corporate structure, this is not a reporting unit with separate financials. How does it all come together, just so people understand?

It is not. Exactly right. We have not shifted the segment reporting. We've got some ownership structures that are sort of in play in there as well. So, for example, we manage the enterprise and government effort on behalf of Verizon Wireless, which is a joint venture between Verizon and Vodafone. In that regard, I feed a piece of the Verizon Wireless P&L. In terms of our wireline business, we had several years ago put all of the wireline assets together into a single segment and we have not chosen to peel that apart, at least at this point in time. So when we report publicly, we talk to the wireless and wireline segments. We will usually provide some commentary below the line.

So what can you tell me that gives the reader a sense of the size of your organization?

We've talked about this in a variety of different contexts. In terms of total revenue, it's just under a $30 billion concern inside what is a $110 billion Verizon overall. Our network is in 150-plus countries around the world, 2,700 cities. We have people on the ground in 82 of those countries, with obviously a significant concentration and focus here in North America, where all of our assets come together, including wireless. We're growing our businesses in EMEA, in Asia-Pacific and Latin America as well. Obviously, as we watch our clients' evolutions and we see where their business is bringing them, it's important for us to make sure that we are able to support their expansions. Initially our work in those places had been what we called "B end" support of our primary customers. But increasingly we've begun to do more what we call "A end" sourcing for companies that are based in Asia, based in Europe, less so in Latin America. ["A end" refers to the headquarters location of a multinational company. "B end" refers to areas with regional offices, large employee populations, retail outlets, etc.] We are just now beginning to pick up our investment levels down in Latin America. But we see again, of course, Brazil, Argentina, Peru, Colombia. There's a lot of interesting activity happening there as well.

Makes sense. I want to drill down into specific things like mobility and cloud and the Internet of things. But before we do that, at a high level what were the goals when this business coalesced, as you said, and what have you achieved over the past -- it's been a little over a year now?

Yes, sir. It's about five quarters. The first most important thing for us to do was to recognize that the value we must bring is by positioning our business in such a way that we leverage all of the assets. We have a very interesting collection of stuff. If we think about all of the trends that have emerged in enterprise and medium business, government, what we've been trying to do is amass a layer of assets that anticipate those points and positions for what is inevitably going to be a fairly significant disruption here. So to your question, the first job that we needed to do was to simplify, streamline and address the fundamental service delivery issues that we had as a business.

I'll describe it in a few ways. Each of these companies that we acquired themselves had been somewhat acquisitive, particularly MCI. And if you look at the spread of networks and systems and processes that underpinned them, and even the product portfolio that sort of grew almost sort of out of control, what was becoming a problem for us was a level of effectiveness in terms of our service delivery. The level of friction required to make a promise to a customer and then to deliver against it was very, very high. So we embarked on a massive program, looking at the entire lifecycle of the customer. Beginning with initial engagement through quoting and design and contracting and invoicing and service assurance and triage and lifecycle management, I'm talking about very fundamental things. But they were incredibly difficult to do. We had a business that was built in silos. If I was in order management, I did order management. I didn't look left, I didn't look right. We have really turned that on its head. We had 855 unique IT systems supporting our business. Prior to coming here, I was chief operating officer of Verizon Wireless and we had about 70 systems that ran a business that was roughly three times the size. So 855 is a lot. It's probably more than we need, you know? My very first hire in this job was my chief information officer [Ajay Waghray]. Fortunately, the guy that I put my arm around had been my CIO at Wireless and a very, very solid guy and so he came across. He has been working very aggressively to reduce the systems landscape. We took 160 systems out in 12 months' time. We took another 65 out in the first three months of this year.

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Your readers, particularly the CIOs, would be the first to say: "Whoa, OK, there's more to this than systems," and I would agree with that wholeheartedly. It's really the fundamental business-process reconstruction that has been the focus of our energy and attention, which allows us then to retire systems. We've built an entirely new operating environment to run the business. In roughly 11 months' time we were able to conceive and deliver a very strong operating platform that is providing stunning breakthroughs in efficiency and effectiveness, substantial increases in production, productivity, dramatic reductions in the service intervals, full-scale automation through process. At the end of the first quarter, we had about 30 clients we had put on this and we're seeing really, really good results. Now it's a matter of phase two, which is migration. I have many, many thousands of customers around the world. As I build out the operating environment to cover their suite of services, we move them on, we gain those operational benefits both inside our business and obviously and importantly for the customer, in terms of the service experience.

Makes sense.

So that's been an important part. We're simultaneously working to streamline our product portfolio, and I say "streamline" very purposefully. There was a notion inside of our business that infinite variability was a positive trait. That the ability to listen to our customers' requirements and to sort them down to an infinite degree of variability was a positive attribute of our company. But the fact is we've recognized that while we can make an infinite number of promises, the ability for us to reliably deliver against those promises, the ability for us to build scalable, consistent, high-quality solutions that meet their requirements, is very, very important. It's a reorientation, if you will, of the organization around saying: "In this particular domain, for this particular business problem, which we have solved dozens of times for companies around the world, we bring a degree of credibility and expertise to this. Bring those solutions." We can do configurability, of course. We can flex according to a specific customer's condition, but the idea of starting with a blank sheet of paper every time gets you to a point where you end up having literally thousands and thousands of permutations which is just not supportable and defeats the value of scale.

Which accentuates the deliverability issues that you were talking about?

Exactly right.

On that point, though, does that mean, say, actively trying to migrate people off of things like older frame relay-type services?

Yes. What are we porting forward into the future and what are we going to leave behind? You have to survey the landscape of our customers today, what do they buy from us? Should we just try to rewrite everything and import it into this [new] world? Well, no, we're bringing junk, and we're going to pollute the environment, and the value of our scale and repeatability and excellence in service delivery would be compromised by that approach. A very hard thing for our teams to do is to take this range of options, this range of variants, down from here to here. What would that look like? Example, how many standard versions of private IP do you need? How many speeds, keep it really simple, do you need here? And I said -- let's go for six, not knowing how many we had. We had 2,700.

2,700?

And I'm pretty confident that there was somebody who might say: "None of those fit my requirements." You get the point. Now there is a balancing act here, because what I don't want to do is to fold it up to such a point where it's not effectively serving the customer's real needs. But this is where every product manager needed to look through their portfolio and say: "How do I centralize this in such a way that it delivers great value to the marketplace, but it allows me to build muscle? It allows me to streamline process, allows things to flow through so I can deliver them fast and service them reliably?"

And also drive cost-saving to the customer?

A hundred percent, sure. I'm glad you raised that point, because again, we have an ethic, and it's a cultural shift for my team. That notion of following the customer right down to the most infinite level of detail on this crazy level of variability, but at the end the customer is now required to add cost to their business. I've had these conversations with a number of our key clients where they say: "Your work in this area -- because I've taken them through it -- will save me on my SG&A line." Obviously, this is hugely important. Their needing to hire folks to support the services I'm providing them shouldn't be necessary. I will tell you that we know this is a journey. We know this is a multiyear endeavor, and our job is to stay with it. And so the assurance I give my team is that we will not stop, we will go until we're done. So we're making good progress.

The other [key goal] is the transition from a business that has been more transactional by definition. If we sell network services -- I don't believe these are commoditized services, but some on the buying end might say -- well, you know, that's a procurement issue. Maybe my CIO will look at it once in a while but OK.

Certainly one way it's easy to compare you versus another provider.

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