Verizon: Not just a phone company

Verizon uses investment strategy to build its capabilities beyond being just a telephone company.

One way to grow a company is to create new markets and invest in infrastructure and innovation, such as earmarking $23 billion to build the FIOS fiber-optic system, investing in cloud computing and Web services technology, and securing Web 2.0 solutions for government use.

That's the strategy espoused by Ivan Seidenberg, chief executive officer of Verizon Communications Inc., a Top 100 company for 2009 that ranks No. 16 with $1.7 billion in prime contracts.

Several government agencies use the FIOS Gigabit Passive Optical Network and a “product we call converged fiber to the desktop,” said Verizon Federal President Susan Zeleniak.

“We’re not a manufacturer or a software developer, so we bring together partners and best-of-breed technologies to create our solutions,” she said. “I think that Web 2.0 is going to be the big game-changer."

Zeleniak said that because Verizon is a network provider, “we’re in a perfect position to deliver cloud computing solutions. Every CIO I talk to is looking at how to use these kinds of services to further their agency’s mission.”

Last year’s $28.1 billion acquisition of regional cell phone operator Alltel Corp. made Verizon Wireless — and its majority stockholder Verizon Communications — the nation’s largest cell phone services provider. The acquisition boosted Verizon’s wireless income 29.6 percent compared to last year and now represents 57 percent of Verizon’s revenue.

Wireless for government isn’t “just to carry around your BlackBerry,” Zeleniak said. “Wireless integration is a top priority in the kinds of services we provide.”

Under a General Services Administration Networx award — Verizon won spots on both the Universal and Enterprise contracts — the company won an Interior Department award that was significant more for its essence than its $15 million value.

“The problem government has is that wireless is so decentralized in the way it’s purchased,” said Warren Suss of Suss Consulting Inc. Tracking and managing the 22,000 mobile devices used by Interior’s eight bureaus will demonstrate Verizon’s management capabilities, he said.

“Probably my biggest challenge in this space is helping our customers to understand that we’re more than a phone company,” Zeleniak said.

In April, Gartner Inc. named Verizon among the five leaders in providing managed security services. That helped “demonstrate that we are a security and [information technology] solutions company, not just a phone company, although we are a darn good phone company,” Zeleniak added.

However, Verizon will have to overcome cultural resistance from some clients to make the new solutions and services sale, Suss said. “Agencies are used to running their own railroad.” They’ve bought and run their own hardware and software, built their own networks, and handled their own customer service, he said. “The challenge will be to get them to buy all of that in a new way.”

Most conversations with Zeleniak inevitably lead to network security. “It’s probably our federal customers’ No. 1 challenge,” she said. “We run the world’s largest Internet, so we have a lot of practical experience; we know what tools it takes and what kind of capabilities it takes to secure a network.”

The company’s strength in internally focused security capabilities is undeniable, Suss said. “In addition to being an enormous provider of Internet services, it also has an enormous network to defend every day.”

A carrier’s network, including its worldwide infrastructure, gives it a unique advantage over systems integrators, Suss said. For Verizon and FIOS, for example, the costs of laying fiber, running back-office operations, operating system development and managing networks “can be spread between federal and commercial clients,” he said. “That’s an advantage it’s tough for an integrator to beat.”

But for security services, Suss said, “the federal government generally has turned to the integrator community.”

For Verizon, Suss added, “the challenge is whether the company can take its strong internal network security capabilities and package them for federal agency consumption. The results on that aren’t in yet.”

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