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Verizon buys CloudSwitch, Burlington start-up that set out to make cloud services safe for big companies

Posted by Scott Kirsner  August 25, 2011 09:36 AM

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Verizon is announcing this morning that it has acquired Burlington-based CloudSwitch, a three-year-old company that helps its customers run existing enterprise applications using cloud-based services, with high levels of security. CloudSwitch had raised just over $15 million from a group of Boston venture capital firms, but terms of the deal aren't being disclosed.

CloudSwitch will be part of Verizon's Terremark business unit; Verizon bought the IT services provider earlier this year for $1.4 billion.

Terremark and CloudSwitch had already been partners. CloudSwitch CEO John McEleney tells me that the deal was sealed just after Fourth of July, when he met with Verizon EVP John Diercksen at the Red Barn in Westport, CT. McEleney says that CloudSwitch had been planning to raise a third round of venture capital this fall, but Verizon's offer presumably was more appealing than running that gauntlet.

But the deal wasn't without hiccups. "As the final things were happening, you had the US almost defaulting, the stock market going down, and the Verizon strike," says McEleney. "I was like, 'My god, can we get some tailwinds here?'"

As part of the deal, McEleney says that CloudSwitch's roughly 30 employees — including the senior management — will stick around in Burlington. "This will be Terremark's hub of software development for the cloud," he says.

McEleney says that Terremark and Verizon are "respectful of what Amazon Web Services has done, capturing the hearts and minds of the developer community. But we think there's still a huge opportunity to provide enterprise cloud services, with support and service level agreements."

As for the acquisition price, McEleney claims that "the investors and employees and senior management are very, very happy with the deal."

That's two "verys," for those keeping score at home.

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Innovation and technology news that matters, on a new website from the Boston Globe, featuring Scott Kirsner and other original reporting.

About Scott Kirsner

Scott Kirsner was part of the team that launched in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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