Cloud Brokerage and the Future of the IT Utility
Abstract: Cloud Brokerage is an emerging trend in the broader cloud computing industry. Opinions differ widely about what it means to be a broker and the significance brokers will have on the future of the industry as a whole. The reality is that the brokerage model signals the real potential to commoditize the compute utility, which will climax with the genesis of compute as a tradable commodity like soybeans, oil or minerals. In this four part series I will take a deep dive into the concept of cloud brokerage and connect the dots between the key trends and market demands that will shape a force few in the industry see coming and fewer still are prepared to accept.
Part I: The Analysts Weigh In
The National Institute of Standards and Technology (NIST) has established a working paper on the subject of cloud brokerage, signaling the importance of a movement that is taking shape inside the cloud computing industry as a whole.
The NIST working document describes the Cloud Brokerage success criteria as follows:
A cloud-user wishes to carry out an action on cloud-provider-1 using a federated interface, with no direct knowledge of cloud-provider-1 commands or interfaces. A cloud-management-broker offers the cloud-user a federated interface to multiple cloud-providers through a human user interface, an application programming interface or both. The cloud-user selects desired cloud-provider-1 resources, action and action parameters using the cloud-management-broker interface. The cloud-management-broker collects and marshals the selected action and parameters from the cloud-user‘s selection and issues the desired command to cloud-provider-1 using cloud-provider-1 native interface.
The idea of cloud brokerage warranted enough noise to be covered in detail within the analyst community in 2011. However, depending with whom you subscribe, cloud brokerage has very different meanings. While there has been definite progress on the behalf of the analyst community, I think the potential for what this model could mean for the cloud computing market goes much deeper.
To be clear, I believe the role of what I am calling the “infrastructure broker” will be the most significant movement in the computing industry since the advent of virtualization and cloud.
Before I get into the immense complexities of that statement, let’s take a look a few perspectives from key industry analysts:
Gartner:
According to Gartner research expert Benoit Lheureux, the role of the Cloud Service Broker (CSB) is to “aggregate and add value to cloud services by providing a single point of entry to different types of cloud services.” Gartner goes on to illustrate some key defining characteristics of a cloud broker. According to Gartner, a CSB is a CSB if they genuinely perform:
- Aggregation across VARS and IT Distributors
- Integration with Systems Integrators
- Customization for SI’s and Professional Services organizations
Gartner’s definition of Cloud Brokerage is by far the lightest among the analysts. If you believe Lheureux, Cloud Brokerage is really just the modernization of the IT channel.
451 Group:
451 generally consider the category of CSB a part of broader market called cloud on-ramps. In addition to providing some sort of provisioning technology, CSBs differ “in that they provide a value-added economic function, which matches workloads to the best execution venues.”
While I think 451 only provides cursory attention to cloud brokerage as a concept, the are at least more directionally correct in the sense that they see Brokerage providing a level of sophistication that is unique in the delivery of cloud services – namely the concept of ‘workload matching’.
Forrester:
I think Forrester has done the best job among the research outfits when it comes to taking a seriously deep look at the CSB market definition. Forrester sees the CSB
playing a pivotal role in the future of the entire industry. Analyst Stefan Reid’s taxonomy picture does a fantastic job of identifying the interaction of different players.
According to Forrester, “the simple broker model gains value only by comparing similar cloud provider options and using dynamic provisioning based on the actual spot prices of these resources.” This sounds similar to 451 and Gartner in direction and tone.
But Forrester goes on to elaborate on what they see the as the evolution of the brokerage model. “The full broker [model] goes far beyond [the simple broker]. It uses “cloud bursting” to provide IT users with higher value for a lower price.” Cloud Bursting, Forrester explains, “is the dynamic relocation of workloads from private environments to cloud providers and vice versa.” I’ll admit a slight sigh when I hear the cloud ‘bursting’ term (again), but I think Forrester has a great grasp on the technical role of the broker.
Gartner sees brokering as little more than modern distribution. 451 sees the concept as something they instinctually must cover but the details are hazy. Forrester has obviously put the most thought into their analysis. But the consistent underlying theme within these analysts is that brokerage insinuates a model whereby vendors inserting themselves and their technology between supplier and consumer to provide a layer of transactional value.
The debate and discussion goes much deeper than this and the potential for the cloud broker is much more profound.
In Part II of this post we will take a closer look at the role of the intermediary and who is likely to take up this position in the market.
Will a Real Cloud Broker Please Stand Up?
By Douglas Steele, COO, 6fusion
This is the first of a series of posts on cloud brokers, their role in IT infrastructure markets, and their impact on IT infrastructure as a tradable commodity.
First, let’s try the following exercise:
1) Open your favorite search engine
2) In the search box type “cloud broker”
3) Open up a new tab in your browser
4) Go back to the same search engine
5) In the search box type “commodity broker”
Did you see the difference? Let me explain.
It seems ‘cloud broker’ has become one of the many concepts du jour in cloud lately. More over companies that do anything related to cloud services are calling themselves a ‘broker’ in an apparent attempt to capitalize on the opportunity to help customers connect to many cloud providers via a single web portal.
Over a year ago, 6fusion’s visionary founder and CEO, John Cowan, had this to say about the emerging concept of cloud brokerage:
“Cloud brokers will focus on the business of compute rather than the technical organization of compute. And the business of compute has nothing to do with cloud computing or the technology driving this revolution. The business of compute is about the commoditization of compute, network and storage infrastructure.”
Now, go back to your search results in Step 2) above. Are any of the companies in your search truly cloud brokers?
Hardly.
Software companies that claim to intermediate cloud providers and customers are not cloud brokers. They are cloud resellers or integrators. There is a subtle but very significant difference here. Resellers fulfill a service request from a customer and take a commission, and integrators translate data between cloud services. Brokers, on the other hand, assume a risk position by acquiring supply and make margin on their ability to successfully carve up sell side transactions into smaller premium buy side contracts matching unique market demands.
Dr. James Mitchell, CEO of Strategic Blue, who are launching one of the first real cloud broker businesses in the market called Cloud Options, argues that true cloud brokers are financial brokers, not resellers or integrators:
“The guys that are trying to sit in between the cloud suppliers and the cloud buyers in the billing chain, allowing each to buy or sell on a financial deal that suits their own circumstances, are true cloud brokers” says Mitchell. “They are the guys that hedge against the risk of changing expectations of future cloud pricing and buying on larger volumes for longer durations, only to further break those volumes into smaller blocks that match a buyer’s forecast cloud needs.”
Now, go back to your search results in Step 5) above. Is the picture getting clearer?
Cloud brokering is about enabling the financial intermediary; it is not about the underlying technology to resell or interconnect different cloud providers.
Dr. Mitchell admits one of his biggest obstacles has been “the very painful exercise to compare pricing between providers to help customers select a cloud provider which meets their needs financially as well as technically, so they don’t just give up on public cloud and go back to a DIY approach. There are just so many factors to correct for; you need to be a rocket scientist to figure this stuff out,” Mitchell muses.
Ironically, what Dr. Mitchell needs is rather simple: “We really just want to know how much cloud a customer uses now, and expects to use in the future, and then offer them a pricing deal that suits their business requirements,” he says.
More on that in a future post…
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