Verizon debuts cloud computing service

Verizon Business (NYSE: VZ) unveiled its much-anticipated cloud computing service today, which the company calls Computing as a Service, a deliberate departure from the approach taken by cloud innovators such as Amazon -- one that is tailored more for large and mid-sized enterprise customers.

Like other cloud offerings, Verizon’s CaaS allows customers to pay for data-center resources such as storage and application hosting dynamically based on the amount of resources they consume. Using a Web portal, customers can daily adjust the amount of infrastructure they use, coupling it more tightly with their own usage and demand trends. Using a combination of VMWare virtualization technology and its own proprietary code and logic (and employing HP and Red Hat), Verizon has reduced the time it takes to provision blocks of 50 to 100 servers from weeks to minutes.

“With CaaS, we can turn on a physical server as easily as we can turn on a virtual machine,” said Patrick Verhoeven, Verizon’s senior product manager of IT solutions. “That’s a unique proposition.”

Key to Verizon’s offering is giving customers a choice between virtual infrastructure (for example, server resources that are distributed among multiple physical servers) and traditional physical infrastructure. Because while virtual servers might make sense for Web content and applications, for example, apps with high input and output such as databases and email are best supported with dedicated devices, Verizon said.

Enterprises are likely to want such a mix of physical and virtual machines for the foreseeable future, said Melanie Posey, IDC analyst. “That’s going to be the reality for enterprises for quite some time. There’s probably not a single enterprise customer on Earth who says, ‘Okay, we’re shutting down our data centers and throwing away all our servers, and we’re going to move everything onto a virtualized cloud infrastructure.’ [Verizon’s approach] fits the way enterprises are going to use cloud computing infrastructure, which is very different than the way small businesses or individual software developers or even departments within enterprises are going to use cloud computing infrastructure -- for a specific project or workload, not for all of their IT.”

CaaS customers will pay a one-time fee of $500 to join Verizon’s cloud, then a subscription fee of $250 per month for access to it. And on top of that, they pay for the resources they consume: for computing, the number of servers per day (physical or virtual); for software, the number of central processing units or servers per day (depending on the type of software); for storage and backups, the number of gigabytes used per day; and for bandwidth, there are service tiers.

Potential customers are already asking whether they can throttle their bandwidth up and down each day, and Verizon says they hope to add that capability by summer’s end.

Verizon’s model of basing prices on servers (physical or virtual) is positioned as a simpler alternative to some of the more innovative pricing models – with their attendant new vocabulary, including prices based on computing units called “instances” – that have gotten Amazon and its EC2 cloud offering so much attention. Verizon’s model lets customers more easily estimate their costs for any increase in usage based on terms they already know, the company said.

“A lot of our customers told us they found some of the other pricing models in the industry fairly confusing,” Verhoeven said. “When you talk about ‘instances’ or ‘CPU cycles,’ that’s a hard thing for them to get their heads around. We tried to use metrics that are well understood in the industry. When you deploy a virtual server, you’re paying a fixed fee per day for that virtual server. There are configuration options and dials you can turn, but that’s the basic pricing model.”

Many of Verizon’s large multinational customers have complex needs to begin with, so simplicity becomes more important. (CaaS will be targeted toward firms with at least 1 or 2 IP professionals to control their purchase with Verizon.) For example, some large customers want to be able to track the infrastructure consumed by each of their brands or applications. CaaS allows them to do so and charge their own internal business units separately for what they consume.

And unlike other cloud offerings, don’t think of CaaS as an app developer’s sandbox, Verizon said. Rather, it can run apps delivered by Verizon or developed by its large enterprise customers. However, Verizon could publish open APIs before year’s end, Verhoeven said.

“The immediate launch will allow customers to dynamically provision, through user interfaces, the resources they need, but we also see the value of being able to provision those types of resources programmatically,” he said. “The API is available today, and we’re using it for our own user interface. But we’re looking for the right use cases; we’re still doing due diligence to make sure we understand what customers are looking for when they want to interface with the environment in that type of manner. I’d say by the end of this year we’d have a published API that customers could leverage.”

In the mean time, because Verizon is offering CaaS over not only its public IP backbone but also its private MPLS backbone, customers can deploy back-office apps using CaaS.

Though some see cloud computing’s most promising potential to be the offering of platform-as-a-service, CaaS isn’t PaaS. And for that matter, Verhoeven said, neither is EC2. “Whether it’s Amazon or CaaS, you’re still talking about infrastructure as a service,” he said.

Verizon is working with beta customers now but can’t name them yet and hopes to add new customers in coming weeks. But its new CaaS customers are likely to be its existing data center hosting customers.

“Effectively [CaaS] is a retention play,” IDC’s Posey said. “Right now they’re concerned with, ‘If our existing customers want cloud in addition to the traditional hosting we’re offering them, we have to have something too or they’ll take that incremental business to somebody else.’”