Qwest Cloud Courts Middle Market

Qwest Communications International Inc. (NYSE: Q) this week announced its 17th data center, serving 12 major US markets as part of its managed hosting service and cloud computing service offer.

The new 129,000-square-foot center is the third in the Washington, D.C., area, and was built to meeting growing demand for "as a service" offerings.

Qwest is seeing its greatest demand from business customers who aren't big enough to gain the necessary economies of scale from operating their own data centers but still want security, reliability, and scalability, Eric Bozich, vice president of national services for Qwest, tells Light Reading in an interview:

Light Reading: How is this market growing, and how has it changed since Qwest started building data centers?

Bozich:: What we really see is a shift in the way our enterprise customers are starting to and will increasingly, over time, want to procure their IT services. Back in the day when we were building these things out, businesses were ready to shift from on-prem to off-prem facilities. Carriers like Qwest got into the business because we could do it at scale, more efficiently than an enterprise customer could do it themselves. But a lot of customers wanted that off-prem facilities to be geographically close, because they were going to be sending their techs to install equipment and configure stuff. They wanted to be able to jump in the car and go touch the equipment and see the blinking lights.

The trend we see now is that customers are looking more critically at how they are procuring and consuming IT services. They see managed hosting and cloud computing as more viable and cost-effective alternatives to building things themselves, or they are even taking the intermediate step of getting critical systems from third parties.

Light Reading: What does that mean for the cloud computing industry?

Bozich: It opens up a very large trillion [dollar]-plus IT services market place that we see as something being very complementary to what we are already doing with managed hosting, cloud computing, network services, providing that in an ecosystem that can be secure, reliable, highly available, and very cost-effective –- and that is the really big driver. It’s not that the IT environments are getting too big and complicated to manage, it’s just that they don’t have the critical mass to take advantage of the cost-efficiencies.

Light Reading: So it’s not that they can’t build their own infrastructure, it’s that they can’t do it cost-effectively?

Bozich: It comes down to a build-buy decision, the way we look at the numbers. There are large enterprises customers who already have the size and scale -- more than 10,000 servers in IT environment today -- and they can work with an IBM Corp. (NYSE: IBM) or an HP and create a cloud environment that can come very close or actually be at the same level of efficiency that a carrier can provide.

Then there are medium- to large-sized businesses, with several hundred or even several thousand servers, and they can’t achieve the same level of efficiency if they build it themselves. It you can rent that and there’s an economic advantage to doing that, then that’s what you do.

Light Reading: With everyone getting into cloud computing and hosted/managed services, how does Qwest differentiate?

Bozich: The answer is straightforward. We already operate a national and global fiber-optic backbone. The cybercenters are all connected to that infrastructure, and we can provide an end-to-end environment that other cloud offerings can’t really replicate. We can attach customers to those cloud environments that can be distributed all across the country and all across the globe and provide an end-to-end service experience with the security, reliability, high performance, high availability, scalability that meets all customers’ requirements. If you don’t own and operate all that is involved in that ecosystem, you can’t compete with company like Qwest.

Light Reading: What does the competitive picture in cloud computing look like to you?

Bozich: We break it into three segments: You’ve got the public cloud services that are out there today, and it’s the usual cast of characters -- Amazon.com Inc. (Nasdaq: AMZN) and Google (Nasdaq: GOOG) and Microsoft Corp. (Nasdaq: MSFT) and other folks that are in that game. I wouldn’t necessarily characterize them as business-class services, but they are targeting businesses of various types. Really these are services that residential customers or small businesses would avail themselves of, because they would be comfortable using the Internet to connect to these services.

At the upper end, you’ve got the very large companies that are in the "build it themselves" mode -- most are working with system integrators. We fit in the middle -- we have ability to provide very scalable secure business class, private cloud environment attached to national global assets -- to customers that sit in between low-end and high-end.

Light Reading: Who do you compete with in that space? Bozich: It’s an emerging marketplace. We are certainly aware of what AT&T Inc. (NYSE: T) and Verizon Enterprise Solutions are announcing and some other players that are positioning themselves. I don’t think anyone really owns this space yet. That’s a great environment to have.

Light Reading: Given that this is an emerging market, are cloud computing services well-defined or is everyone offering something a little bit different?

Bozich: I think there is a generally accepted framework of the different categories of service. Everyone has a little different way of packaging their services together, providing customers with tools and dashboards and other kinds of things. Some of that will shake out. There aren’t a lot of industry standards right now. There are a number of things coming to help define interfaces and boundaries.

Light Reading: Is your cloud computing service always an extension of your network services?

Bozich: At this point we are not establishing a rule about that –- it obviously makes all the sense in the world to get the cloud service and the network from [the] same provider, with an end-to-end SLA [service level agreement], and that is where adoption is going to be focused. But there are always exceptions and we will be flexible with those types of requests.

— Carol Wilson, Chief Editor, Events, Light Reading