CenturyLink Calls Partners 'Essential' In Driving Cloud Growth, Partners Pleased With Data Center Sale

Telecom giant CenturyLink has made its official exit from the data center market, but partners are not alarmed. In fact, solution providers selling colocation and cloud-based services believe that, as carriers offloading their physical data center assets to an operator more familiar with this business, support for data center and colocation services could improve.

CenturyLink announced on Friday its plans to sell its data centers and colocation business for $2.15 billion to a consortium advised by investment firm BC Partners. The consortium, which also includes Medina Capital Advisors and Longview Asset Management, will include CenturyLink's 57 data centers and colocation business into a newly formed global, secure infrastructure company.

C3DNA is one of the companies that believes that CenturyLink's value in the cloud market has never come from its data center facilities. C3DNA is an application life-cycle management provider and CenturyLink partner that sells the carrier's multi-cloud connectivity services.

[Related: CenturyLink To Sell Off Its Data Centers, Co-Location Business For $2.15B]

"That's a very commoditized business, so if they can eliminate the data center operations costs and offload it to someone who can do that part really efficiently, that's a great move for CenturyLink," said Paul Camacho, co-founder of Santa Clara, Calif.-based C3DNA.

Camacho doesn't believe the change in ownership of the data center and colocation business will change margins for partners, either.

"There will be little to no impact for us – there's no difference from a cost or margin perspective," he said. "The only thing for us is we need to make sure to maintain a certain quality of service that we have come to expect from CenturyLink."

Despite selling its data center facilities, CenturyLink will receive minority stake valued at $150 million in the new infrastructure company. As a result, CenturyLink will be largest sales channel and customer for the new company, and will continue to sell colocation, hosting, and public and private cloud services and solutions. The carrier is encouraging its partners to do the same, David Meredith, senior vice president and global general manager for CenturyLink's global data center and hosting business, told CRN.

"It's going to be business as usual," Meredith said. "Really, it's just CenturyLink not owning the underlining data centers and being responsible for operating the data centers, but it will continue to offer the same solutions."

Meredith said that the goal of the transaction is to drive growth in cloud and hybrid IT adoption.

"We view the channel ecosystem as an essential element in driving growth in this business, so we plan to be very friendly and easy to deal with for partners helping us grow the business by closing deals," he said.

Association Resource Group (ARG) is a telecom solution provider that sells colocation and data center services from CenturyLink. Greg Praske, CEO of McLean, Va.-based ARG agrees with Camacho that CenturyLink's decision on whether to own and operate data centers will have very little, if any, impact on partners.

However, Praske believes that partners could see service and support improvements as a result, similar to the outcome of Windstream's data center business sale to TierPoint. Atlanta-based TierPoint, who scooped up Windstream's data center assets in 2015 for $575 million, is more focused on data center operations, and that deal has been beneficial to partners, he said.

"It was a nice concept when CenturyLink bought [the data center business unit] Savvis, but you need to be laser-focused on data center operations," he said.

"I would expect that the buyers will bring the data center talent from CenturyLink over," Praske added.

CenturyLink's Meridith said that today's data center deal only includes CenturyLink's 57 data center facilities that the carrier has today. The transaction will not include Level 3's 350 global data centers.

’[Nearly] every large network provider has some data center component, and the Level 3 deal is network focused,’ he said.

Solution providers that are selling CenturyLink's colocation and data center services will also have access to additional security services from security and analytics companies including Cryptzone, Easy Solutions, Brainspace and Catbird. The BC Partners-led consortium acquired these four companies, in addition to CenturyLink's data center assets, on Friday.

Tina Gravel, senior vice president of strategic alliances for Cryptzone said that CenturyLink would be its largest channel customer. Gravel expects CenturyLink partners to resell Cryptzone's services via the new deal.

’It's really exciting," she said. "We have never been the kind of company ever to do anything to harm the channel … We are going to do our best to make sure our channel partners are happy with this.’

ARG's Praske said it would be smart for solution providers to sell security services alongside data center services.

"I don't think you can talk about data centers without talking about security," he said.

CenturyLink's Meredith said that the deal with BC Partners is expected to close during the first quarter of 2017.