US telco snaps up Savvis for $2.5B

Managed IT services company to be acquired by U.S. third-largest telco, CenturyLink, in move that signals need for carriers to also be able to provide cloud computing services, notes industry analyst.
Written by Liau Yun Qing, Contributor

CenturyLink, the third-largest telecommunications services provider in the United States, has acquired managed IT services company Savvis, in a deal worth US$2.5 billion.

In a joint statement Wednesday, CenturyLink said it plans to integrate its existing hosting business with Savvis' managed hosting and cloud services, where this unit will primarily encompass key members of the current Savvis leadership team and be headed by chairman and CEO, James Ousley.

Savvis' 32 data centers, located in North America, Europe and Asia, will continue their operations alongside CenturyLink's 16 U.S.-based data centers.

In the statement, Ousley said the "strategic combination" was a natural choice due to the accelerating migration to cloud-based services. He added that the acquisition will combine Savvis' cloud infrastructure and managed services capabilities with CenturyLink's hosting assets and "large" business customer base.

Telcos expanding beyond networking
An industry analyst noted that the move to keep Savvis as a separate unit and retain its CEO was a "good sign". Gartner's research vice president, Lydia Leong, said in a commentary: "If CenturyLink is smart, Savvis gets largely left alone to continue what's been a pretty successful co-location, hosting and cloud infrastructure-as-a-service (IaaS) business."

The acquisition also signals CentryLink's cloud computing ambition, she said. "Few carriers can afford to be without a cloud strategy and, apparently, CenturyLink has decided to buy one rather than to build one." Leong said.

In a follow-up commentary the analyst added that telcos were now feeling the need to go beyond addressing networking requirements to include data center needs.

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