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

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Precisely. You fall into a mode and you develop a certain set of capabilities, you have a certain engagement model. But when you step back and survey the assets, the cloud computing platform, all of the data center services, the managed security suite, the mobility solutions that we are continuing to augment, and then of course the IP connectivity around the world, there is more that we can bring to bear here. It was important for us to understand that the people that we put in front of the customer needed to be able to go deeper into the business. Increasingly, as we see democratization of IT, if we think about the involvement of business owners, line-of-business leaders driving, to a degree, technical direction, directly or indirectly, our ability to get in front of that, our ability to have a dialogue with the people who are making those decisions or dealing with those issues in the business and engage them, partner with them and bring them solutions, that's very, very important. Candidly, as I looked across our organization, we had some pretty significant deficits. So we have gone through a process of talent transformation which was very, very substantial in 2012. Literally 38% of the folks I have selling for me today weren't on the payroll a year ago. That's a very big change. And our sourcing model changed. Where do you find talent to engage with the client in the manner that we've just described? It's a different talent pool. It's a little less telecom-centric, still strong technology background, but an ability to interact from a business perspective becomes very important as well. So we looked at transformation, streamlining of the portfolio and the on-the-ground operational transformation as sort of our three most important endeavors here in 2012. Obviously the work continues.

Today the comparison that comes to mind for everyone is AT&T and Verizon. But whom do you want to be compared to? With the kinds of assets you're pulling together, with the direction that you're trying to lead the company in, what's a better comparison?

I think the fact is people will think of us first and foremost as a telecom provider and there's certainly nothing wrong with that. This is an important point. The IP networks are the critical enabler of all of the technologies that ride on them and that's not to be taken lightly. But that said, what's very encouraging for me is to look across our deal funnel and see the mix of solutions that are making their way into that and then compare who is the incumbent and who are the principal competitors. It's been fascinating for me to watch. It's one of my indicators of progress here to see that change. Early on it was in many cases what we call these global integration deals where I take over and manage someone's network. Maybe it's a flip from TDM to IP-based networks. You would see, of course, strong competitors such as AT&T and BT and maybe OBS [Orange Business Services] and others. Now, increasingly, I'm seeing IBM, I'm seeing HP, I'm seeing Dell SecureWorks, I'm seeing Accenture. I'm seeing a different grade of competitors, depending on the solution we're speaking of. How does a customer think about Verizon?

If you asked 100 CIOs at random: "What does Verizon represent?" We have much work to do there, because I think they would still answer the question with a very strong orientation toward network. I don't want to lose that. I tell our teams that we're not Accenture, we're not IBM. If you ask my chairman, in one sentence or in a string of words, what is the aspiration? We aspire to be a globally connected solutions provider. Those four words he's said over and over again. That's a different positioning than the company has had, because there's a bunch of words in there that sound different. What we do very well is we build infrastructure at scale. We really know how to do that. Sometimes I think even inside our business our teams, our individual employees, have incredible capabilities in that area which we almost take for granted. They're of high value. It's not just networks. I give you for an example competency in micro-billing. We generate unique and specific bills for about 130 million people every month. That's a really powerful capability, and can be leveraged in a number of ways beyond serving a bill to someone. Is that an API that I open to enable service delivery in a third-party data center? That's kind of interesting. Because that's a competency that we have that others may find of value. My job is to open up our infrastructure, build it up, moving our way up the stack. There are what we think of as adjacencies and near adjacencies and then as you go further away ...

As long as you don't go too far away.

Well, that's key. I don't think we'll go horizontally. I think that where we have to think very carefully is how we go vertically. I would suggest that we narrow as we reach the top of the pyramid because we are not, and don't aspire to be, a significant SaaS player. But that's not to say we won't deliver software solutions to the marketplace. But the key is: What is it about that solution that our assets allow us to do in a meaningful, differentiated and sustainable way? If it's something that's pure software, somebody who is faster, more agile and focused single-mindedly on that space can do better than we can. We should let them do it. We should bring them to market with us. We should find a way to partner with that company. If it's an area that we think can be significant and no one has focused on it yet and we see a near-term economic opportunity -- but more than anything else we're trying to start a market -- we can invest for that as well.

But go down the pyramid and think about the physical dimension of a cloud and data center, the [co-location] business. That's an important part of our Terremark business. I believe that if you look at our company in a couple years' time you'll see the strategic cloud computing services being much more important to us than simply the data center colo business, but they're both important, because these assets at scale matter. We almost use cloud as the first line to determine market viability, potentially before we build our own center. And then that drives the expansion plan, and then cybersecurity, of course, a very important practice for us. We think about mobility. But again, an infrastructure play there, a platform orientation where we invite significant third-party development. We become a route to market in many cases, or in other ways enabling independent market creation.

Let's drill into mobility. This is one where our readers are candidly struggling. They went from an environment where they dictated what everybody had and used to an environment where everyone's telling them what they're going to have and use. How are you trying to help them get ahead of that challenge?

It's a really interesting area, and I'm smiling a little bit because my orientation on this has changed about 180 degrees in the past 15 months.

You loved BYOD over there at Verizon Wireless.

When you look at our position inside enterprise accounts, we do really, really well. Our market share inside enterprise accounts for Verizon Wireless is significantly higher than our general market share. Corporate customers really value the proposition around quality and reliability and all that goes with that. You might consider that the move to bring-your-own-device would portend the risk that my share [in enterprise] would end up reflecting my general market share. My general market share is pretty good, but it's not as good as it was in corporate. So the first instinct is almost defensive, where you say: "That's a bad thing." You almost want to scare the heck out of your customers -- all the bad things could happen if this crazy set of barbarians is let loose on your business. We see it very, very differently now.

Look, the fact of the matter is the IT estate that's been established and built with all of its controls and all of its security and all of its capital constraints has been massively eclipsed by what consumers are using in their daily lives. Of course, this is what's powering and driving this whole phenomenon. Our job and one of our opportunities now is to help the enterprise manage that phenomenon. So we have a series of capabilities that we deliver, something called enterprise mobility as a service. Think of it as a secure container in which a business can place its mission-critical applications and in a secure way deliver them and then control them. You almost partition the device. We chased this a couple of different ways, and I will tell you, for a little while we were coming up with solutions to problems that had not yet been fully validated, like split billing. Ten years ago someone asked us for split billing, so we started digging in and, of course, billing is one of our competencies. That's not really the issue here. It's really about securing the applications, being able to manage what's there. The ability for someone to partition a device, the ability for someone to then manage in a secure way the delivery of those services, to secure and authenticate the user, which is just as important here. These are things that we are doing. Now I would tell you that our offerings are what I think of as first phase. We have to evolve that portfolio as the market continues to move on us here. But it will intersect with our identity and access management practices from a security perspective.

We think of this evolution to the cloud and the movement of data, which has really big ramifications across the whole of our discussion here. One of them is the BYOD notion. It's not just the data that's moved. The employee who is accessing the data has moved too. They've left the fortress. How do you feel about that? What do you do about it? It's one of the points of friction for enterprise workloads to move off of those. It's not the only one, of course, but it's one of them. Can I see my way to moving something, an appropriate candidate for movement? But I'm worried about the rings and I'm worried about, as I really go out there, am I going to be able to know and secure and validate? We think there's some convergence in terms of these product sets that will be pretty natural. But I've got to make sure it's fluid, the development follows those requirements pretty carefully.

Do you think it gets away from device management and more toward apps management?

I think it's both, and identity management, and they have to roll together. This is where we think about what is the secret sauce for Verizon. If I don't leverage the whole of my physical assets and competencies in the provisioning and delivery and development of these solutions, what am I doing? I'm going to be chasing the market instead of leading a market, shaping a market. So your observation is astute. It used to be device and it might be that I want to wipe it remotely. I want to reimage the device. That's a PC-centric mindset. That's someone who has managed laptops for a long time. Maybe they're not in the fortress but they're sort of. There's a little Stockholm syndrome there. They're just not leaving, you know? But now you talk about users who are moving from device to device to device. Penetration rates in the U.S. wireless market are exceeding 100% right now. We said three or four years ago we thought it was going to be 400%. My chairman yesterday said he thought it was going to be 800%. It's not necessarily that someone's going to walk around with eight different devices strung on their chest, but there will be many different ways that these connected machines will need to generate data and send it or access it. How do you know who it is that's at the other end of that? What are the applications that are critical? What are the degrees of criticality? We're building that actually into our cloud construct, and configurable capabilities in our next-generation cloud that will allow the application developer or the enterprise to turn some dials, from a security perspective, from a QoS perspective, in terms of latency sensitivity, session persistence. How do I provide those dials as opposed to just raw compute, raw storage? We think that's actually a really interesting area. Again, it goes back to that connecting the dots of our different assets here.

John, does that also include helping enterprises with either a Verizon-type app store or helping them build their own app stores or managed app stores?

Yeah. That's part of our enterprise mobility as a service, it's effectively an app store. I call it a partition, and I think of it as just, if I were the CIO, and this is my accountability. I've got to serve these applications, but I can't just let go. That's really risky. So what do I do? By the way, no one's waiting for you to figure it out. You've got to do it yesterday. We have the core construct of these private app stores for business which we elegantly call PASB. We have to hire some marketers. But this idea is what led to this micro-notion which is this partitioning concept. It's just the ability to scale it. So what do you need and how do you need it? And again, back to identity management. How do you think about different classes, a different community of users? How do you do control access down to an individual level? These are things that are very important. We know what it is or we believe we have a good idea of where the market requirements are going to take us. The services that we have now are a first-phase implementation against that. But I think you'll see directionally what we're about there. The thing that we're working on right now is with the cybersecurity guys, the folks who are doing the identity and access management work, let's draw a stronger connection here. By the way, to our folks who are working on next-generation cloud, don't forget about this specific business challenge that's associated with BYOD, and build things into your core construct that I think of as dials and levers that can be used by the applications developer to recognize it's not just the app, it's not just the device, it's not just the user. It's the app, the device and the user that creates the magic sort of solution.

I just want to make sure that I understand. Just real quickly, if you got in that classic elevator scenario with a CIO, in one sentence you'd say -- we can help you better with this mobility challenge because ...?

Because our deep knowledge of how mobile networks work and our deep experience in what are the most significant security risks for you as you liberate the data, and our ability to assist you as you evolve your compute platform, that combination of things is what best qualifies us to help you through this series of steps that you need to take.

Today it's largely an iOS and Android world. Do you expect a third or fourth strong platform to emerge?

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