makes sense
When your operating (or aiming to operate) at such a scale the traditional tools typically fall apart pretty quick. Because there's so few organizations operating at such scale, a lot of the problems to address are relatively new and there are only so many people in the world that have experienced them and have ideas on how to solve them. Thus the likes of Google, Amazon, MS, and now Verizon are/will be using a ton of custom in house stuff to manage their clouds because the traditional players just don't have the vision (probably because they don't have the customer base that needs it) to scale in that manor.
I do find it puzzling that Verizon chose an obsolete hypervisor like Xen over KVM though. With Amazon I can understand, their stuff is old and customized to the point where it's hard to make a change. But to deploy Xen in modern times just seems like a really poor decision.
You don't have to look very far than the bulk of your typical vendor "global management system" products to see how poor they are in general. None of it of course was ever intended to be hyper scale, so it falls apart.
Don't think for a minute though that building for this kind of scale makes sense for a SMB. I've worked with a couple ex-amazon folk who all they knew was the amazon way, and they worked to try to replicate that elsewhere - pretty much universally with catastrophic results. You need fairly radically different approaches for small(ish) scale vs absolutely massive hyperscale. Trying to shoehorn one of those to do both is just shooting yourself in the foot -- with one exception -- that you know -- with certainty that you will go to hyperscale fairly quickly. I'm not talking about some bullshit social media company that has aspirations to become the next facebook. I'm talking about something serious, and something closer to reality. Not likely to be an organization I will ever want to work for myself - I have more fun at smaller enterprise scales, where I can work across silos. I cringe at the thought of working for a big service provider.
For a good example of this you can see this page(sorry for the link) where I rip through the hype of SDN and really what a scam the networking industry is trying to pull on (most) of everyone. SDN can make sense for the Verizon's of the world, but it doesn't make sense for the bulk of customers out there:
http://www.techopsguys.com/2013/08/07/nth-symposium-2013-keynote-sdn/
(It literally took years before I figured out precisely what SDN was - got so many conflicting explanations - so I got the answer from the person who invented it(which confirmed my original suspicions) and I felt better about writing on it more directly).
Of course with this new design it sounds like the overall quality of the Terremark/Verizon cloud will go down, perhaps as low as the quality coming out of Amazon (never having used MS or Google clouds I suspect their quality is similarly pathetic), which is unfortunate, but their previous cost model was just about as unfortunate.
A few years ago Terremark proposed to the company I was at a virtualized data center for disaster recovery which had a $3 million installation fee along with ~$150k/mo in monthly fees - this was running on top of their (at the time new) Cisco UCS infrastructure.
I could of bought equivalent HP gear (and 3PAR storage before HP bought em) and used it in house for around $700k and about $20k/mo in hosting (all tier 1 stuff with 4 hour on site support etc, vsphere enterprise plus, no shitty whitebox cutting corner stuff), it was not even two full racks of gear.
Terremark didn't understand how easy it was to manage such a setup("do you have the staff to be able to manage that?" -- me: "dude! it's 12 heavily loaded blade servers, a few switches, a storage array, a NAS gateway, and a pair of load balancers!! how hard is that really!?"), as much as my management could understand Terremark's pricing.
To Terremark's credit though they were the only cloud provider to have the balls to quote us actual numbers, the other players bowed out before spending too much time (one of them gave me a cost of $1 million just so we could stop wasting everyone's time).
They gave us another number, the first number - which had only a $10 setup fee -- though the monthly cost for that was $272,000/mo (not on Cisco UCS). So, obviously a pretty quick ROI for in house.
Terremark is not alone with numbers like this, I hear similar stories from other folks at other providers. Even Amazon's IaaS pricing structure is terrible(mainly due to 90s era architecture which leads to a large amount of wasted resources).