Private Cloud Is Alive, Thanks to Re-Sellers

NEW YORK ( TheStreet) -- Watch out, Amazon.com ( AMZN). The carriers may have found a way to eat some of your cloud lunch.

Re-sellers.

The market's assumption at the start of the year was that private clouds could not gain traction, because companies would rather buy cloud than try to build it themselves. So a bunch of startups are building private clouds for rent, and some are doing quite well at it.

The largest of AT&T's ( T) new cloud re-sellers is Breakthrough Technology Group, based in Morganville, N.J., and known as BTG. It started seven years ago selling AT&T Wireless' mobile phone services. BTG is now the largest of what the company calls its Managed Service Providers (MSPs), which use its network and facilities to deliver private cloud.

The MSP industry itself is sort of a muddle. Some firms calling themselves MSPs focus on machine-to-machine connections. Others do IT outsourcing. Others focus on mobile, which was BTG's original niche. A study from the IT Industry Association CompTIA last year called the MSP market "a work in progress".

BTG itself can be a little hard to find, even online. BTG is also the common name for British Telecom Group , for a health services company also run out of London, for a banking technology consultant in Jacksonville, and for a Swedish paper company. On the New York Stock Exchange BTG is the symbol for a gold company.

Founder Jeff Kaplan's original idea seven years ago was that corporations which wanted managed mobile resources would get them through his company, delivered through AT&T's network and with his management services layered on top of it.

That business is still doing well. This week BTG acquired CelPro Associates of New York City, renaming it BTG Mobility, so companies whose employees are bringing their own phones and tablets to work can still be made part of a corporate network.

But it's the cloud services that are taking off, Kaplan says.

BTG has servers in AT&T data centers in a co-location agreement. BTG runs those servers as private clouds, using what Kaplan calls "best of breed" solutions like Juniper ( JNPR) for security, NetApp ( NTAP) clusters for redundancy, Microsoft ( MSFT) Exchange for e-mail, Citrix ( CTXS) for desktop management and VMware ( VMW) for virtualization and server management.

The result is that BTG becomes the IT department for its customers, targeting "mid-market" outfits with 1,500 or fewer employees. BTG can either run customer operations on a shared server or on dedicated hardware, delivering security, redundancy, and control, the economics of cloud without the do it yourself hassles of building it yourself or the perceived risks of Amazon's public cloud.

These are still early days. Kaplan told Talkin' Cloud last year he expected to have 30 employees by December, and he's kept hiring, grabbing a former Citigroup vice president as chief technology officer and an AT&T executive to manage business development.

Companies that wouldn't think of hiring AT&T for cloud are happy to go with BTG, because Kaplan says it knows their business, and because it's a relatively small business, just as they are. "Mid-market enterprises and below need companies like us," he says.

It's not yet more than a pinprick to Amazon, whose cloud operation is worth an estimated $19 billion. But by having a bunch of little fish like BTG selling private cloud services, carriers like AT&T are not going to be buried like the neighborhood book store, either.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Dana Blankenhorn has been a business journalist since 1978, and a tech reporter since 1982. His specialty has been getting to the future ahead of the crowd, then leaving before success arrived. That meant covering the Internet in 1985, e-commerce in 1994, the Internet of Things in 2005, open source in 2005 and, since 2010, renewable energy. He has written for every medium from newspapers and magazines to Web sites, from books to blogs. He still seeks tomorrow from his Craftsman home in Atlanta.

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