Earlier this month, I flew in to Boston on the hottest day in many years. It also coincided with the running of the Boston Marathon. While many in the press were urging runners not to participate (or to be very careful if they do) in the Boston Marathon, many of us in analyst world were wondering what new and hot things were in store for us at Verizon’s annual analyst event.
Being the first event since Verizon and Verizon Wireless announced a January 1 reorg back in December, aligning assets and creating Verizon Enterprise Solutions, I wasn’t sure what to expect. Having attended a ton of analyst events, I’ll first have to admit some a lot of skepticism going into the gathering. I’ve learned that over the years, usually one of two things happens at these events. First, and most often, a company plans the launch of some shiny new product or service (which just so happens to coincide with the event) or second, a company uses the event as a bully-pulpit to discuss why it is better than its peers.
I’m not sure why, but somehow I sensed this would be different. From the time that Janel Crabtree, Verizon’s head of analyst relations introduced John Stratton, President of Verizon Enterprise Solutions until the event concluded, a strange almost electric energy circulated.
The event.
Stratton led off the event and set the stage for all other speakers by providing background on what led up to Verizon’s December announcement, a discussion of Verizon’s current situation and the future direction of the organization.
As he presented, Stratton highlighted Verizon’s assets and key acquisitions and how they interact to make up the new Verizon Enterprise Solutions group. He tied together organizational and management changes, how they tied together and how they would operationally run. He also provides some of the logic behind the strategic changes that had been made.
But to make a long story short, the move was made to create Verizon Enterprise Solutions as an amalgamation of several sub units at Verizon and Verizon Wireless joined together to uniquely serve the needs of Verizon’s mid-size business, enterprise, and government customers.
Why now?
So what precipitated the change? Was it corporate evolution? Network / asset alignment? Vendor / partner alignment? Needs of customers? Economic non-market factors? The changing role of the CIO?
The answer is an unequivocal yes.
Over the past few years, like the shifting of tectonic plates, Verizon experienced a ground shaking paradigm shift as its corporate structure, asset acquisition over the past half-decade, the changing usage habits of consumers, the evolving role of the CIO, demands of its customers, and strategic vendor/partner relationships combined to necessitate the need to move to a single, coordinated group.
Stratton conveyed that during the evolution, the Verizon and Verizon Wireless teams saw the aforementioned shifts happening but didn’t rush in with a knee-jerk reaction. Instead, they sat back and planned the next steps, letting the market mature and formed three key questions. First, when are we (Verizon) ready to deliver a more integrated set of solutions? Second, when are we ready to deliver a more coherent and cohesive value proposition in the market? And finally, when are we ready to deliver from a service and customer engagement process a proper manifestation of the value proposition? When they could answer these questions, it would be time to move.
So after much internal debate, in December Verizon made the announcement, setting things in motion to create Verizon Enterprise Solutions.
Additionally, towards the end of his presentation Stratton challenged us as analysts to listen closely and actively question his team. He implored us to see if the changes were real or just lipstick on a pig by asking “Is this a veneer or is this real, is this deep, or is it shallow? Because this is influencing everything we do.” And this is perhaps where my skepticism started to melt away.
Foreshadowing?
I believe the move to a single unified group with segmentation by vertical market was foreshadowed way back in 2006 when Verizon and Verizon Wireless broke the silence and spoke about their move to an “A-IMS” architecture. For years, service providers have constructed and deployed services in a “stove-pipe” fashion where each individual service has its own activation, identity management, location, and billing platforms/solutions among a host of other discrete functions. But IMS looks at a telco network through “IT” eyes. I like to call it the “IT-ification” of telecommunication. Where IT organizations have been using service oriented architectures (SOA), telcos have embraced IMS to break down the silos to allow the horizontalization of common functions and reutilization of features. To borrow a quote from a good friend and former coworker, "IMS in its truest sense represents functional decomposition in the network" where the constituent network elements can be rearranged and reconstructed and aligned in a more efficient manner.
This not only allows a service provider like Verizon to deliver services faster and cheaper, but also reduce the cost of launching a being wrong and launching a buggy service or having poor timing. By doing away with the old system of delivering services on individual, disparate networks all under a company logo, it creates a single contiguous, feature-rich communications network. Through this modular approach, IT features can be deployed incrementally without the need for forklift upgrades and the "horizontalization" of common functions reduces OPEX, since the incremental cost of deploying new services once the IMS core is deployed goes down exponentially as components are reused.
Additionally, while Verizon was busy deploying IMS and expanding upon the global IP network assets it had acquired through the purchase of MCI in 2006, a couple other things happened. Mobility became the norm, endpoints became intelligent the “cloud” emerged, and the way companies looked at and used technology changed. New, more consumer-oriented business models and ubiquitous internet access began to usher in a new breed of business and technology leader who now must not only navigate a myriad disruptive and converging technologies, but also provide both business value and technological utility. Where before, having the best network, the fastest computers, and the most elaborate and up-to-date software was a business differentiator, now the CIO must use these tools to either save money or add additional revenue streams.
What about the backend?
While it was not highlighted nearly well enough, the keys to Verizon’s success may hinge on improvements made to the myriad of B/OSS systems supporting Verizon. By using acquisition as a vehicle, Verizon has become the nation’s largest telco, but this has also come with a huge operational cost. Each time, different OSS/BSS systems came along for the ride. As a result, Verizon’s internal IT department has spent untold millions and countless man hours working to unify the operational sub-structure to automate the multiple complex processes that must take place in heterogeneous network such as this.
And while the importance of the network and the investment and improvements to the B/OSS systems Verizon has in place cannot be undervalued, the “reverse integration” as Stratton put it of Verizon’s cloud assets and the acquisitions of CloudSwitch and Terremark have been very important in the evolution of Verizon. It is apparent that the mindset has shifted from that of an RBOC to that of an integrator and solution provider.
A vertical strategy?
Why does all of this lead to a vertical market strategy one might ask? While there are many complex reasons and volumes have been written on the subject, it’s quite simple, actually. While the flattening of the network is resolved with IMS, and things like OPEX savings and quicker time to market are by-products of the architectural change, the businesses buying services from Verizon haven’t changed. While they’ve evolved technologically and gotten smarter about how to use technology, they serve very specific markets. And while all companies use technology, not all companies use technology equally. Specific verticals have their own vocabulary and taxonomy. Some, like healthcare and financial services have their own specific regulations. And in these instances, industry knowledge is power.
Additionally, oftentimes specific vertical markets need very specific solutions. The new organizational structure encourages industry defined, purpose-built solutions that meet a customer’s need.
It appears that in its new organizational structure, Verizon Enterprise Solutions will employ both vertical market subject matter experts and generalists to serve the client. Many of the vertical specialists have a background working within the specific verticals they now serve.
The last word.
While it is too early to grade Verizon Enterprise Solutions on its evolution, the message conveyed at their analyst event was heard loud and clear. And while changes have been expected for some time, it seems there were many reasons that this reorg took so long, with the chief among them being the corporate antibodies – those people resistant to change because of such things as politics, comfort in their current role, unsubstantiated fear, and/or memories of past mergers gone awry.
But the simple matter of it is that a unified Verizon Enterprise benefits partners and customers alike. It allows the company to face the market with much more clarity and utilize the sum of all of its assets to create a comprehensive and cohesive solution.
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James Brehm – Senior Strategist and Technology Evangelist at Compass Intelligence. As strategist and senior consultant for Compass Intelligence, Mr. Brehm’s primary responsibilities are to provide clarity and direction to clientele by evaluating, recommending, and creating innovative market defining strategies. The scope of his work deals with all aspects of the IP value chain; from delivery infrastructure and communication management to devices and terminals and end user content/applications.
Mr. Brehm is a regular contributor to CNBC and is frequently quoted by media outlets such as WirelessWeek, RCR Wireless, the New York Times, ComputerWorld, and the San Antonio Express News and is responsible for representing Compass Intelligence at industry conferences and analyst meetings. You can you reach him at jbrehm@compassintelligence.com.
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