For our latest discussion, Michael Ritter and I sat down with Todd McWhirter of Zayo Group to talk about the simplicity of Layer 1 encrypted services, the need for speed, and what today’s customers understand when it comes to data security.
Prayson: Todd, could you tell us a little about Zayo’s primary business and about the verticals that Zayo is addressing?
Todd: Zayo is a service provider in what we refer to as the “communications infrastructure” space, where we, through acquisition, have acquired the physical assets, primarily fiber, to enable our customers to utilize connectivity and high-bandwidth services.
Prayson: I’ve heard your CEO, Dan Caruso, speak at conferences. Unlike a lot of the other operators who talk a lot about value-added services, Dan makes it very clear that Zayo’s focus is on delivering high bandwidth and low latency. That’s the game you’re in. I like your term: communications infrastructure. Can you expand on that?
Todd: Communications infrastructure means the physical fiber, the data centers, and the hardware which pushes the bits over that fiber and through those data centers.
Prayson: Right. With respect to that fiber, one of the things that we have a shared interest in is Layer 1 encryption. Could you talk a little bit about how you’re using that and why it’s interesting and useful to you and your customers?
Todd: Layer 1 encryption actually came to Zayo through customer demand, so this was more of a pull for the product than a Zayo push. Through the current environment around security and encryption – we’ll say, “The post-Snowden environment” – there’s been increased inquiries around encryption and security services. Zayo have been asked about our ability to deliver Layer 1 encryption managed services, and so we looked into it with our equipment vendor partners and saw an opportunity to meet that customer need. Now we’ve productized Layer 1 managed encryption as a service and are making it available across our footprint.
Prayson: Do you find having that available as a service is a competitive edge, that it helps you win business?
Todd: Absolutely. We’re not aware of any other service providers who are delivering Layer 1 encryption as a managed service, so we see that as a differentiator for Zayo.
Prayson: What are the main verticals, markets or applications where the customers are coming to you? What are the ones where you get the biggest positive response to your encryption offering?
Todd: Financial services and healthcare are the predominant customers who are asking about it. As we’re socializing with our customer base, we’re also talking to sectors including government, technology and content providers, as well as utilities.
Prayson: As you roll out the Layer 1 encryption as a managed service, what are the challenges that you’re seeing? Are you getting questions about key management? Are you getting questions about the security of your own management networks? What are the other ancillary guarantees that you need to provide for it to really be valuable to your customers?
Todd: We do receive questions around the application for managing the encryption, in terms of security certificates, authentication and key rotation. Also just the general education of our customers around how Zayo can provide a managed service for Layer 1 encryption and how the customer accesses that application are probably most of the questions that we’re seeing upfront.
Prayson: What are your customers looking for in answering those questions? Are they looking for certifications? Are they looking to have a site visit and inspect what you’re doing, or are they looking for references from other customers?
Todd: They are seeking to understand how we will present the application to them and how they can use it in their environment. We understand that customers have varying levels of expertise around encryption in their IT security environment, so we educate customers on how the service can work within their environment and meet their security policies.
Prayson: Speaking of differences in customer requirements, are you typically dealing in the US, or do you also have international business?
Todd: We have international business.
Prayson: How much consistency or difference do you find for the enterprise and statutory regulations or certifications between North America and other parts of the world?
Todd: We understand that enterprises need to be compliant with those rules and regulations, and that is what’s generating interest in the Layer 1 encryption managed service. But we also understand that enterprises can develop their own solutions off the shelf.
Our goal has been to define for customers how Zayo providing a Layer 1 managed encryption service has advantages over the other solutions that are available to the customer. We present customers with the competitive value proposition around how Layer 1 encryption is a differentiator amongst the other encryption solutions available in the marketplace.
Prayson: Okay. Then in terms of the applications that your customers are using, does it include access to data centers or data center interconnect, and enterprise WAN applications? And what are some of the typical speeds that you’re dealing with for people who are interested in Layer 1 encryption?
Todd: Data center interconnect definitely, both in the metro and the wide area, and we’re getting requests for anything from 1G to 10G to 100G, in both Ethernet and SAN-based protocols.
Prayson: Do you see any applications where it’s straight enterprise connectivity as opposed to going to a data center?
Todd: I think the primary application we see is data center to data center. It may be an enterprise private data center to another private enterprise data center, or it may be a private enterprise data center to a public data center. We’ve also seen public data center to public data center, so I guess we’re seeing it all from a data center to data center connectivity standpoint.
Prayson: You’ve said that originally your customers came to you asking for encryption, and now that you have it as a service it’s a competitive edge. Do you have a rough estimate of how much of your business today is passing over encrypted fiber, and what do you think it’s going to be in, say, three years?
Todd: Honestly, I don’t have that specific information but I would characterize that not only is Zayo offering Layer 1 encryption as a managed service, but also our customers who are deploying Layer 1 encryption are using our network as transport to implement their own solutions. We don’t know specifically how much encrypted traffic is traversing our network, and I can’t speculate on what the future demand is going to be, but we expect it to increase.
Prayson: As you said, in the post-Snowden era, it’s something that people are going to be looking at more and more as a checklist item to be a part of a fully layered protection, where you have encryption at the optical layer, Layer 2 encryption, Layer 3 encryption, and then higher-level encryption, just so that you have as many layers as possible.
Todd: Correct. We’re also seeing an increase in the questions around the security of our services, the transparency for encryption protocols, as well as compliance with various organizations who define security policies and standards in different areas of the market.
Michael: We talked a little bit about Layer 1 encrypted services. Are you guys also operating Layer 2 encrypted services?
Todd: I’m not aware of Zayo offering Layer 2 encryption as a service today, but that solution is something that is always being evaluated.
Michael: Yes, we see it a lot coming up, especially for traditional enterprise connectivity. So it’s not Layer 3 connectivity; it’s Layer 2. They want to have the same level of security they are now used to on Layer 1. I would suppose, since you guys are big in the connectivity business, that this is a really good opportunity for you.
Prayson: Todd, what are the challenges that you see, moving forward, in providing higher levels of security to your customers? Is it just being able to offer it at higher speeds, being able to add it dynamically? Where do you see your customers going that you have to do some work to meet their needs?
Todd: Customers are definitely requesting higher speed for Layer 1 encryption managed services; customers are requesting our ability to encrypt multiple protocols, in addition to strictly Ethernet. I’d think, as our customers are faced with an increased focus on security, that encryption becomes a more prevalent part of enterprise security strategy, whether it’s mandated by policy or rules and regulations or not.
So, in order to help our customers consume encryption-based managed services, we as an industry need to educate customers on the ease of use of encryption services, particularly Layer 1 encrypted managed services, as well as how cost-effective Layer 1 managed encrypted services are and can be in their environment.
I think customers are eager to learn what’s available in the marketplace to help them solve their security concerns over data in motion. Again we, as an industry, need to educate customers that this is an available and viable solution that will easily integrate into their environment.
Prayson: I think that’s a great way to wrap it up – that one of the big values of Layer 1 encryption is the fact that it’s so easy to integrate; it’s pretty much transparent and, as you said, can be very economical.