We're trying. We'd certainly like to see at least a third player. And it is yet to be determined if it will occur. We are aggressively supporting Microsoft and [BlackBerry], because those are the next two obvious guys. There are some other clouds on the horizon that may or may not come about, some different things that some of the OEMs are trying to do, but timing is tough. The next guy to break through after iOS -- i.e., Android -- there was a clear and obvious path into the market. We helped them with that because we didn't carry the Apple product at the time. So for me, as a matter of being able to compete effectively in the smart phone space, I needed it. [BlackBerry] had that opportunity. They were under the tent already. We were their largest seller in the world. I think [BlackBerry's] new OS is very good. I have a very large, really loyal base in the enterprise business, government, financial service, anywhere where data encryption and data security is important.
There's no love for Android in the enterprise.
You're right. If you think about it, Microsoft or [BlackBerry], either should have a natural path in. But the question is whether the inertia problem going to be too much for them to overcome. This body is definitely in motion. Android is tough. The guys at Google would say it's not really fragmented, but if you look at it from an enterprise perspective, it is challenging. And it's a proposition that is sort of tough for IT professionals to get comfortable with. iOS is much more monolithic, but they bring their own problems. Neither Google nor Apple is incredibly focused on the enterprise market. That leaves the door open. I think [BlackBerry] is certainly able to exploit that if they can, and will. We're very much behind the first device they're going to ship this summer. I think the qwerty keyboard, the physical keyboard device, is pretty important for them.
People still love that.
They really do. I think you'll see a strong thrust, but the market is going to determine successors here.
Let's turn to cloud. I want people to understand what you view as your competitive strengths in cloud. What makes Verizon a great cloud company?
The market that we focus on first and foremost is large enterprise and the public sector. These are two very, very important parts. Our understanding of most of those markets is pretty significant. We know what is required in terms of resiliency, scalability, consistent quality of delivery. There are many great companies that are innovating in the cloud space, but what we've seen is the market has really developed around small and medium enterprise. At last look we saw about 70-plus percent of the market that had been established is in that space and principally in North America, really, really deep in North America. Additionally, [there are] buyers that look like medium enterprise but are actually a very large enterprise. This is where you see what's been called shadow IT. But it's just a line of business. It's, "I need to do something and do it fast. I can't take the 12 months it's going to take me if I go through standard process of spinning up the server. I'm just going to go and do this." We look at Amazon as the guys that shot out ahead in this space. They've done some very good things in terms of building out their ecosystem, their tools. Their on-boarding model is a very frictionless approach and it has provided them great success. They've illustrated to the marketplace a new paradigm, which I think is very important. We've taken all of this into deep consideration, and I would tell you that as we look back, we've made some pretty interesting acquisitions over the last couple of years. But one that really kind of flew below the radar was our acquisition of a small company called CloudSwitch. The core kernel of their IP for us was very, very important and is an essential element in the foundation of our next-generation cloud platform. We look at some of the virtues of the Amazon model and ask: "How do you create a very simple, frictionless environment to enable very fast spin-up of servers, very fast instances of an application, up and down really quickly?" That has a lot of implications to it. And as we take you more deeply through precisely what we're doing here, here's what I would tell you. How do you gain the value of low friction, fast, very cost-effective cloud computing, with resiliency, scalability, enterprise-grade, enterprise orientation to the service and support model? Imagine if you could cover all of that ground. What would that look like? How important would that be to the marketplace? We believe we are very meaningfully down that path. We have done it by flipping the model 180 degrees. And that's my tease for you. That's how I'll keep you coming back. [Stratton is referring to upcoming cloud announcements that he declined to detail.] But this is for us very important. We look at serving the enterprise client, look at where the workloads are that they haven't moved yet. When we talk about 70% of cloud being generated in the small to mids, it is still so early in the game and there is still so much in front of us in terms of these sort of wholesale movement of work here. It starts with the obvious sort of test-dev stuff, the stuff that kind of peaks and then goes off peak, the utility computing stuff ...
Today there's a lot of stuff on Amazon that's sort of the fringe or the side cases of IT. Is it your belief that what you're planning here will start to drive more of the standard work of IT into the cloud?
Yes, absolutely. As you know, not every enterprise application is a perfect candidate for cloud. And that's OK. But a lot are. As you think about the extended value proposition for the business owner in terms of what else it enables for their workforce, for their workflow, all of those downstream process opportunities, these have to be the incentives to move. But what we must do is remove the barriers. And the barriers are fairly high right now. We look at it first and foremost with my own business. My CIO is working very closely in partnership with my cloud team to move thousands of VMs into our environment. So we're going dogfooding, if you will, a little bit, as we go here, to learn about the specific pain points and to make sure we've addressed them very carefully. But yes, we believe that as you remove those barriers you will begin to see much more [movement into cloud].
So your goal is to change the comfort level?
Yes, sure. You've got to replicate to a degree the functionality and the environment that was offered and supported internally. I also have to care for a range of scenarios here. Private data center, private cloud, fully public, and everything on that continuum. How can I create a model that is flexible enough that I can really move in? I can go in as opposed to it's always coming out.
You're talking a virtual private cloud type thing?
Sure.
One of the things that we see people struggling with is dealing with so many cloud providers and losing that integration that was such a hard-fought thing over the decades. Is there a role for someone like Verizon as sort of the front end to the cloud for multiple things?
We think there is. I don't think we have yet fully vetted that strategy.
Billing, management, security, access, all of the things people need no matter which cloud provider they're dealing with. Is there an opportunity to create an ecosystem that says: "I don't really care which of these SaaS providers you work with, but you can work with them through me. Small, large, I can integrate billing, I can do all kinds of things." Is that an opportunity?
Yes, it is. I'll come at it in a little bit of a different way but it leads to the same outcome. Each of my business units needs to carry its own weight, needs to be viable on its own, needs to operate and compete in an open environment. I remember about six months after I came into this role, an analyst said in some form: "How's it going for Terremark? It must be tough for those guys now that you've got them and you require the Verizon network in order to use their colo and cloud capabilities." I said: "Whoa, quite the opposite." We have a network-agnostic position inside of our Terremark business and we actually went out to our Verizon previously-owned-and-operated data centers and introduced that agnostic approach because the centers have to stand on their own. Specifically, the cloud must stand on its own. The Hughes business that we acquired last year from a machine-to-machine perspective, another pretty good area, it's network-agnostic. Why? It's a global business. I don't have wireless networks outside the United States. Not to mention that several of our clients there use competing networks today. And that's perfectly fine.
So as you think about what I've just described now, if each of these need to grow and build and expand their reach in their respective domains, it allows me then to federate at some level. So if I create billing engines and payment engines that can be used by any, now you can use them in combination. The way I like to think about this is I have a picture of our platform, and it's getting more and more interesting to look at. It's like a series of bricks and it starts at the network layer and it works its way up into the IaaS layer, the PaaS layer, the SaaS layer. You see what's owned and operated, strategic, less strategic, partner here, acquire here, develop here, all this infrastructure. From a commercial development perspective, I should feel very comfortable with the idea that there's a range of users of this platform. It starts with a guy who might simply be using a piece of my network to deliver a solution. I don't have any idea he's even doing it. And it works its way up to a person who might be using two or three elements of my infrastructure, to someone who I might be doing billing on behalf of, all the way up to the partner who's developed a SaaS solution that is my principal solution for a particular industry in a particular space that is fully embedded in my infrastructure and I'm actually repping it, all the way to owned and operated, where it's literally me. Take Network Fleet, my commercial telematics business, where it's my application, my data analytics, my platform, my network -- obviously, maximum value capture here. I want to make sure that as we go from largest to smallest that we have created a very easy, open, simple, frictionless environment in which companies can interact with us, companies can enable their solutions, they can bring them to market. I will find a model economically that allows me to capture my investments, but that to me is sort of the secret sauce, if we can pull that off. That's what we're building toward.
So one last cloud question. We do an unaided question on a survey about cloud -- who are the top cloud providers? And it's Amazon, Google, Salesforce.com at the top of the list. Does it frustrate you -- with the size of your cloud business -- that Verizon's name doesn't come up?
To no end.
Do you think that will change?
I do. I am quite certain of it. I say that with great confidence because first and foremost my experience, my background is as a marketer. But the first thing you do, in my opinion, is make it great and then let the world come and see. I don't want to market ahead of capabilities. Now, we have good capabilities right now. We are building great capabilities. You're going to see us about the second half of this year begin to really spool up. But every time I read any analyst's piece, any article, that talks about cloud leaders that doesn't mention Verizon, every member of my executive leadership team gets a copy of it from me, because I want it to annoy them.
So I could just create trouble for you by doing that.
Yeah. You absolutely can.
The Internet of things. GE CEO Jeffrey Immelt says it will add trillions of dollars in value to our GDP. How big a business is it today for Verizon Enterprise and where do you see it going?
It's measured today in the millions of connections. I think there is a range of views in terms of how big it is by the end of this decade. I've heard anywhere from as low as 10 billion to as high as 30 billion machines connected to the Internet. So this is another of the areas that we are trying to get out ahead of -- hence, the acquisition of Hughes. And some other things, like nPhase, which was a very small venture we did with Qualcomm, which we bought out last year. But if you think about the Internet of things, it is very natural for us -- IP networks, the wireless networks, the administrative platforms, controlling the endpoints and all the sort of monitor, managing control stuff. Also, the cloud storage. We've been doing dozens and dozens of these fairly sophisticated machine-to-machine implementations for companies in all kinds of fields -- heavy machinery, manufacturing, financial services, insurance is a big one, vending, supply chain, energy management, a lot of smart grid stuff. We did a very significant smart grid implementation for a regional utility company who is now drowning in petabytes of information and so it's actually added cost for them. It looks like a problem, but in talking to the CEO of that business, it's: How do you turn that into an opportunity? What do you want to do with that data -- not only to manage and run your business, but what other value does that data have?
So does that create a big data/analytics opportunity for you guys?