Virgin Media heads off into the clouds

Virgin Media, the UK’s biggest cable TV operator, hopes to exploit the revenue earning potential of its fiber optic network through a new venture into cloud-based virtual data centres for businesses. The new venture is shared with global ICT (Information Communications Technology) vendor Savvis, which will provide the computing resources, while Virgin Media delivers high-speed access. It is aimed at medium-sized enterprises with 250 to 1000 employees. Those companies are targeted because they are big enough to require a data center for business applications, but not so big that they have their own extensive IT infrastructures.

Many other large cable operators offer business services, but these are usually confined to communications over existing networks. Virgin Media claims it is breaking new ground, at least for Europe, by teaming up with a specialist data center company to provide a complete end-to-end ICT package. This will be sold on a pay-as-you-go-basis, which Virgin Media believes will appeal to many medium-sized enterprises by saving money compared to other virtual data center services that have recurring charges. Like other cloud-based IT services, it supposedly reduces the need for expensive in-house IT systems and expertise.

However, at the launch it became clear that although Virgin Media has an excellent grasp of communications issues as a Quadruple Play provider in the UK, it still has some homework to do on the IT front. In practice, few of the target enterprises are geared to setting up workloads ready to run for just an hour on an external cloud based system and then get all of the required results off in time. For each business, the process of using an external virtual data center itself takes considerable expertise and effort, which can offset the upfront capital savings because the processes take much longer than anticipated to complete.

So, even though Virgin Media is teaming up with Savvis to provide some of this expertise, it is clear that it has not thought the whole process through and will need to do more than merely provide connection to the external clouds. There is always a danger that a company entering a radically new business area will find it has taken on more than it bargained for.

The new venture may also be constrained by the fact that Virgin Media’s network, and therefore the scope of the virtual data center service, only covers the UK, when many businesses want international coverage. This may then lead to partnerships with other operators in different countries. Savvis, as a multinational company, could provide a bridge.

Furthermore, Virgin Media believes the venture will conveniently consume off-peak network capacity, on the basis that businesses send most data during the working day, while its TV customers consume most bandwidth between 6 and 10 p.m. This is less true than it used to be in a global economy, especially for larger companies.

But, if anything, at least other cable operators with unused network capacity will be watching with interest.