What makes the cloud computing initiatives in the company so transformational is the opportunity to unify the entire customer experience in the consumer, enterprise and mid-size and small business packaging and experiences on a common platform (Verizon Investor Relations, 2012). Today Verizon customers are all running on multiple service platforms depending on their mix of services; with a cloud-based platform there will be consolidation of back-end services and a more cost-effective delivery of services (Verizon Investor Relations, 2012). This has significant revenue and cost reduction opportunities for Verizon over the long-term and could significantly change the capital structure of the business.
Another significant opportunity for Verizon is the rapidly growing machine-to-machine (M2M) market that shows significant potential in several of the core vertical markets the company competes in (Verizon Investor Relations, 2012). In June of this year Verizon reached an agreement to purchase Hughes Telematics for $612M which gives the company a solid base of automotive and fleet telematic technologies, services and most importantly, software. These M2M technologies will give Verizon the ability to create route optimization services and advanced planning and replenishment services for those customers who have complex supply chains (Verizon Investor Relations, 2012). These technologies are integral to the performance of FedEx, United Parcel Service (UPS) and other freight-based companies, and Verizon hopes to also become the technology platform of choice for comparable enterprise customers (Verizon Investor Relations, 2012).
Their core base of customers continue to rely on the consumer wireline business, and have proven to be among the most loyal of customers globally as cited by their senior management (Seidenberg, 2002). The potential to upsell and cross-sell long-standing customers in their base has long appealed to the company yet only recently with the inclusion of cloud technologies has the company had the opportunity to move with speed on new innovations (Verizon Investor Relations, 2012). These cloud technologies are also what's behind the continued rapid growth of their television, internet and phone services to consumers. This triple-bundling strategy has significantly reduced customer churn, by over 70% in the latest fiscal financial period (Verizon Investor Relations, 2012).
First and most significant is the relatively high costs of their services business to operate, which can quickly drain even the highest margin business models internally (Verizon Investor Relations, 2012). This continues to be a significant drain on overall profitability. Second, the saturation of mobile phones and the constraints of 3G and the nascent 4G network are making the growth of the company even with investment in innovation (Seidenberg, 2002) and through well-orchestrated mergers (Peaks, Arbogast, O'Keefe, 2009) difficult to accomplish.
Third, Verizon is ironically as not as well-known in the enterprise market as others including at&T (Peaks, Arbogast, O'Keefe, 2009). This has led to the company quickly acquiring companies who can help to support their direction in enterprise cloud computing (Ya, 2011) and heavy investment in mobile application development for the enterprise (Verizon Investor Relations, 2012). Despite all of these efforts Verizon still lags behind at&T in the development of effective enterprise service strategies that generate the profitability this segment is capable of.
References
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Peaks, D., Arbogast, G.W., & O'Keefe, R. (2009). When a merger is not a merger. The Business Review, Cambridge, 12(1), 39-45.
Seidenberg, I. (2002). Telecommunications: Delivering innovation to our customers. Vital Speeches of the Day, 69(1), 26-29.
Sharma, a. (2009). Verizon wireless nears $2.5B deal to sell Alltel assets to at&T. LBO Wire.
Verizon Investor Relations (2012). Verizon Investor Relations. Retrieved from http://www22.verizon.com/investor/
Ya, D. (2011). Verizon boosts cloud computing business with $1.4B purchase of terremark. SNL Kagan Media…
