Cloud Brokers MAKING ITAAS A PRACTICAL REALITY?

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1 Cloud Brokers MAKING ITAAS A PRACTICAL REALITY? This report examines what a cloud broker is, its components and functions, its role(s), its audience and how it supports the delivery of ITaaS by turning technology into service delivery. KEY FINDINGS If cloud is the on-demand version of computing, brokering is the on-demand version of IT procurement. A cloud broker is one capability of a cloud management platform (CMP). CMP suppliers are in a tricky position: They must preserve the agility and self-service model that led the business to adopt the cloud in the first place, while at the same time allowing IT to retain control. Cloud brokers business model is similar to those of traditional distributors, VARs and SIs but in the cloud world they must respond more quickly and be able to scale. Brokering is not about price, per se it s about matching workloads to the cloud to find the best performance match for those workloads. The trust that comes with branded technology is less important than getting the experience right. This market is not terribly meaningful from a revenue point of view today; however, it is very meaningful from a leadership perspective. OCT 2014

2 I 451 RESEARCH ABOUT 451 RESEARCH 451 Research is a preeminent information technology research and advisory company. With a core focus on technology innovation and market disruption, we provide essential insight for leaders of the digital economy. More than 100 analysts and consultants deliver that insight via syndicated research, advisory services and live events to over 1,000 client organizations in North America, Europe and around the world. Founded in 2000 and headquartered in New York, 451 Research is a division of The 451 Group Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. New York 20 West 37th Street, 6th Floor New York, NY Phone: Fax: San Francisco 140 Geary Street, 9th Floor San Francisco, CA Phone: Fax: London Paxton House (5th floor), 30 Artillery Lane London, E1 7LS, UK Phone: +44 (0) Fax: +44 (0) Boston 125 Broad Street, 4th Floor Boston, MA Phone: Fax:

3 II Cloud Brokers TABLE OF CONTENTS SECTION 1: EXECUTIVE SUMMARY INTRODUCTION KEY FINDINGS METHODOLOGY SECTION 2: WHAT IS A CLOUD BROKER? WHAT IS ITAAS? WHY ARE BROKERS NEEDED? Figure 1: Best Execution Venue for Workloads by Cloud Type WHY BECOME A CLOUD BROKER? Figure 2: Entities Involved in Broker and Traditional IT Procurement SECTION 3: HOW DOES IT WORK? CLOUD BROKERS BROKERING THE SELFIE APPROACH DISTRIBUTORS-TURNED-BROKERS CLOUD EXCHANGES AND BROKER-DEALERS CLOUD MARKETPLACES INTEGRATORS Figure 3: The Cloud Broker Market Landscape SECTION 4: BROKER-ENABLING TECHNOLOGIES REQUIRED TOOLS AND FUNCTIONS Figure 4: Broker-Enabled Technology Market Landscape CLOUD BROKER AS PART OF A CLOUD MANAGEMENT PLATFORM Figure 5: Common Service Offerings of CMPs SECTION 5: GETTING INVOLVED CONSIDERATIONS WHEN BECOMING OR USING AN EXTERNAL BROKER SERVICE CONSIDERATIONS WHEN BECOMING AN INTERNAL BROKER

4 III 451 RESEARCH 5.3 THE ENTERPRISE ITAAS MATURITY MODEL Consumerization and Shadow IT Does the Organization s ITaaS Maturity Match the Technology Offered? Figure 6: The Enterprise ITaaS Maturity Model Where To Start SECTION 6: USE CASES AND ECONOMICS CAPGEMINI T-SYSTEMS VODAFONE ENTERPRISE PERSPECTIVE SECTION 7: MARKET OVERVIEW THE MARKET FOR CLOUD BROKER SERVICE PROVIDERS THE MARKET FOR CLOUD BROKER-ENABLING TECHNOLOGIES SECTION 8: CLOUD BROKERS: CONCLUSIONS AND RECOMMENDATIONS RECOMMENDATIONS FOR VENDORS RECOMMENDATIONS FOR SERVICE PROVIDERS RECOMMENDATIONS FOR ENTERPRISES RECOMMENDATIONS FOR INVESTORS INDEX OF COMPANIES 31

5 1 451 RESEARCH SECTION 1 Executive Summary 1.1 INTRODUCTION Cloud adoption is a fact. Demand for delivering IT at lower cost is growing and irreversible. The experience of using new style IT services principally cloud and new-generation applications underpins this shift. These economic pressures and the rise of the cloud have IT departments thinking more like businesses and striving to transform themselves from cost centers into IT as a service (ITaaS)-delivery organizations. The broker label has typically been used to connote a middleman who deals in a commodity and simply makes a small margin in buying and selling it focusing on the financial aspects of the transaction. But like the term private cloud which has been the battleground for endless definitional debates there seems to be a more commonly accepted usage emerging: A cloud broker helps customers use multiple cloud providers and gives them freedom of choice in which service is used for what purposes or workloads. It directly supports what 451 Research calls the operation of best execution venue (BEV) strategies. Carrying out BEV strategies involves a lot of complexity under the covers, handling APIs, configuration management, resource behavior differences and so on. But the net result is that customers should be able to use brokers to give them the same optionality as using cloud providers. It s been 18 months since our initial surveillance of the embryonic cloud broker market. Now it seems everyone wants to be a part of the cloud broker gestalt in one capacity or another. This report examines what a cloud broker is, along with its components and functions, its roles, its audience and how it supports the delivery of ITaaS by turning technology into service delivery. The report charts the cloud broker market, highlights firms that supply technology components and/or provide service delivery that support ITaaS, and scrutinizes the diverse range of business models that are either in play or being road tested. It also identifies technical, organizational and business challenges that remain unsolved or unresolvable. 1.2 KEY FINDINGS If cloud is the on-demand version of computing, then brokering is the on-demand version of IT procurement. A cloud broker is one capability of a cloud management platform (CMP). CMP suppliers are in a tricky position: They must preserve the agility and self-service model that led the business to adopt cloud in the first place, while at the same time allowing IT to retain control. Cloud brokers business model is similar to those of traditional distributors, VARs and SIs but in the cloud world they must be able to respond more quickly and be able to scale.

6 2 Cloud Brokers Cloud broker-enabling technology vendors provide tools that enable vendors and IT departments to act as brokers themselves. These tools may enable multicloud migration, management and billing, but it s still the role of companies and departments to pay bills directly to their cloud providers. A thousand CMPs are blooming; however, enterprises that are risk-averse will seek customer references and evidence of long-term sustainability before entrusting management tasks to third parties. Credentialing the approach with customer references remains a key challenge for CMPs and broker service providers. For consumers, cloud brokers provide the combination of free will to choose BEVs and a trusted advisor to help them make decisions. They also give the consumer someone to blame (and contact) when things go wrong, as well as a single view of the IT landscape. Successful CMPs will enable customers to consume the cloud the way they want to rather than enforce a prescriptive approach. For providers, cloud brokers offer a cheaper cost base, an easier justification as a trusted advisor, the opportunity to add value and a stickier solution. Increasingly, a CMP won t be considered full-service unless it can deliver a cloud broker function that provides BEV capabilities to users. Brokering is not about price, per se it s about matching workloads to the cloud to find the best performance match. The trust that comes with branded technology is less important than getting the experience right. This market is not terribly meaningful from a revenue point of view today; however it is very meaningful from a leadership perspective. Success is measured in usage, not providing brokerage to the galaxy of suppliers. Technology is the easy piece; enterprises need to understand their own level of maturity in using an ITaaS approach. A typical enterprise is running VMware with automation internally, has some Amazon Web Services running, has Azure via an enterprise Microsoft license and will be examining the suitability of OpenStack. That s a bunch of clouds which will need to be brokered. This is a long-term game. An IBM or HP can afford not to do anything here for many years and still come out on top by acquiring market leaders. We wouldn t bet against the CMP opportunity ultimately rolling up to the incumbent manager framework vendors that have proved very resilient over the years. Legacy CMPs by their nature tend to have strong integrations with traditional enterprise tooling, such as ITSM, and deep domain expertise around specific technology, such as on-premise VMware. The downside is that support for hosted cloud is an add-on in most cases it s not the DNA of the CMP and usually immature as well.

7 3 451 RESEARCH 1.3 METHODOLOGY This report is based on a series of in-depth interviews with a variety of stakeholders in the industry, including IT managers at end-user organizations across multiple sectors, technology vendors, managed service providers, telcos and VCs. This research was supplemented by additional primary research, including attendance at a number of trade shows and industry events. Reports such as this one represent a holistic perspective on key emerging markets in the enterprise IT space. Because these markets evolve quickly, 451 Research offers additional services that provide critical marketplace updates. These updated reports and perspectives are presented on a daily basis via the company s core intelligence service 451 Market Insight. Forward-looking M&A analysis and perspectives on strategic acquisitions and the liquidity environment for technology companies are also updated regularly via 451 Market Insight, which is backed by the industry-leading 451 M&A KnowledgeBase. Emerging technologies and markets are also covered in additional 451 channels, including Datacenter Technologies; Storage; Enterprise Platforms & Infrastructure Software; Networking; Information Security; Data Platforms & Analytics; Development, DevOps & Middleware; Social Business Applications; Service Providers; Cloud & IT Service Markets; European Services; Multi-Tenant Datacenters; Enterprise Mobility; and Mobile Telecom. 451 Research also has a robust set of quantitative insights covered in products such as Change- Wave, TheInfoPro, Market Monitor, the M&A KnowledgeBase and the Datacenter KnowledgeBase. All of these 451 services, which are accessible via the Web, provide critical and timely analysis specifically focused on the business of enterprise IT innovation. This report was written by William Fellows, Research Vice President, with substantial assistance from Dr. Katy Ring, Research Director Global IT Services; and Dr. Owen Rogers, Senior Analyst, Digital Economics. Any questions about the methodology should be addressed to William Fellows at william.fellows@451research.com. For more information about 451 Research, please go to:

8 4 Cloud Brokers SECTION 2 What Is a Cloud Broker? Cloud brokering, in theory, is a simple enough concept facilitating the use of cloud resources from one or more providers. Unfortunately, this simple definition has the consequence that a great many entities have laid a claim to being a cloud broker. The result, in the spirit of cloudwashing that preceded it, is brokerwashing. So many companies are now using the term as a marketing slam-dunk that it has become devalued. However, it s important to recognize that this is still a real trend, and we must take care not to throw the baby out with the bathwater. Being a broker owning and operating a control plane, catalog or console that can automate scheduling, delivery and access to cloud services is shaping up to become a new and lucrative development of cloud adoption. Suppliers from all sides of the industry are pushing this battle from both technical and financial points of view. There s a spectrum of functions brokers can perform that extends from basic B2B meet-me and introduction services such as aggregation, federation, selection (decision engine), integration, migration and fulfillment to capacity management and optimization, billing, vendor management, contract negotiation and contract ownership. The more of these functions that are in place, the greater the broker capability, and, from the enterprise perspective, the bigger the headache as buyers experience the complexity of catalog sprawl from competing providers. Being a broker requires a range of supporting technologies, over and above a standard CMP. 2.1 WHAT IS ITAAS? ITaaS is an operational model in which the IT department acts and operates as a distinct business entity, creating services for the other lines of business (LOBs) within the organization. At its core, ITaaS is a competitive business model where an IT department views the LOBs as having many options for IT services, and the internal IT organization has to compete against those external providers for the LOB IT requirements. To pursue ITaaS as a strategy, certain tools are required to support cloud brokering on one hand and consumer-like access to services on the other. Internal IT departments need to move to a more ostensibly commercial footing, competing with service providers and technology vendors. Service providers themselves need to undertake radical internal change in order to restructure around the requirements of new-style IT service delivery. Because of the significant changes required on both the buy and the supply sides, this is not an instantaneous market development. However, few doubt its inevitability.

9 5 451 RESEARCH 2.2 WHY ARE BROKERS NEEDED? Users expect to be able to make rational decisions about how and where to run applications and tasks based on workload profile, policies and SLA requirements. Service delivery options are growing as the worlds of outsourcing, hosting, managed services and cloud converge. The most sophisticated IT users may choose to operate as brokers. However, even those with supplier management expertise will likely struggle with the complexity of mechanisms available in the as a service (-aas) world to manage services. Today, the reality is that most organizations, especially smaller ones, don t have access to more than a handful of cloud services the same kind of access they probably have to utilities as consumers. Indeed, where these relationships do exist they are mostly bilateral sourcing relationships between the end user and service provider. This is why we expect third-party tools and services, including technical and financial cloud brokers, business application marketplaces and other integrators, to play an important role in providing access to additional resources, services and BEVs for enterprise buyers. A cloud broker offers a service that procures and orchestrates BEVs on behalf of users. Some applications, workloads or service requests may be best suited to running on premises; for others a public, multitenant cloud may be sufficient, while a dedicated hosted venue may be necessary to meet others. Figure 1 from TheInfoPro Cloud Wave 6 Study shows how different venues and services will be required for different workload and application types. In an ideal configuration, a BEV wrapper describing the requirements of the application, workload or service request will enable it to be parsed by a CMP s broker (plus relevant decision and transformation engines) to automate procurement from the appropriate venue. FIGURE 1: BEST EXECUTION VENUE FOR WORKLOADS BY CLOUD TYPE Batch Computing Applications 55% 29% 8% 8% Customer-Facing Enterprise Applications 35% 39% 8% 17% Back-Office Enterprise Applications 32% 40% 8% 21% E-Business Hosting 27% 31% 10% 32% Test and Development of Applications 26% 45% 10% 19% Collaborative Applications 18% 26% 10% 45% Cloud-Native Applications 15% 8% 74% 3% Non-Cloud Private Cloud Hybrid Cloud Public Cloud

10 6 Cloud Brokers Brokers deal in multiple services, providing access, enablement, fulfillment and possibly contract ownership. Regardless of sector or vertical, their raison d etre is to arrange a transaction between a buyer and a seller. In the IT world, brokers have existed for decades vendors and service providers have relied on networks of distributors, resellers and SIs to match their products to their revenue-generating customers. What has changed is the nature of their roles: The cloud means that intermediary parties must operate dynamically and offer services on demand. In the traditional model of IT, distributors, resellers and SIs have not been consumption-based entities. This has meant long sales cycles, fulfillment measured in weeks or months and no guarantees a product would be in stock. In the cloud world, users expect services to be available as soon as they are requested. This is due in no small part to users experiences with consumer technology, which have set a high benchmark. And here lies the big difference between the traditional IT supply chain and the new cloud supply chain: If cloud is an on-demand version of computing, brokerage is an on-demand version of IT procurement. New markets and opportunities are emerging as a result: Vendors are selling technologies to create and operate brokers, and cloud broker service providers are emerging as both discrete entities and additional functions of existing market players. There are increased distribution opportunities and new target acquisition candidates for service providers themselves. Both internal and external buyers and sellers will require brokers acting as distributors, resellers or system integrators these are the broker service providers. And indeed within enterprises many IT departments expect to act as brokers themselves offering ITaaS, matching internal demand with external providers. Broker service providers, whether they are a third party or internal, need to deliver consumers on-demand access to disparate and aggregated cloud resources, either natively by the broker itself or federated directly from the cloud supplier. Broker-enabling technology vendors supply tools to create brokers. Using a broker model also has a range of other benefits. It: Enables effective data-driven decision-making by offering transparent choice in cloud services. Removes the pain of governance, procurement, utilization and settlement. Offers options and flexibility to avoid being painted into a corner. Uses decision engine and BEV wrappers to determine destination venue/service source automatically. Empowers enterprise IT, helping to turn it from a cost center into a service broker to the organization. Policy engine ensures IT retains control and provides DevOps with the agility and flexibility of on-demand resource access, thus offsetting the use of shadow IT. Reduces headaches in contract and vendor management. Role-based access and a single management pane to all services enable organizations to regain control of shadow IT.

11 7 451 RESEARCH Supports right-sourcing. Reduces time-to-use by using cloud broker as a trusted advisor to bypass lengthy RFP processes. Enables a user to move workloads without disrupting the business control, instead of relying on central IT to fully manage the workload. Matches workloads to cloud, rather than focusing on price. Provides a contractual arrangement for moving workloads from one cloud vendor to another should the need arise. 2.3 WHY BECOME A CLOUD BROKER? Enterprises will always desire a range of BEVs to address all their needs and preferences. The fact of the matter is that the cloud market is competitive, and providers that are not meeting enterprises demands risk losing business to their competitors. Enterprises want to deal with a small number of trusted advisors that can help them with all their requirements if a current provider is not taking on this role, someone else likely will. But providers should embrace this opportunity; the more services that a customer is taking from a provider, the more embedded that vendor is likely to become in the ethos of that company. This provides a private view of the organization s current and future requirements, which the vendor can addressed before its competition can. Once embedded, an element of lock-in is likely to take hold it s much more difficult to migrate interdependent, multicloud services that are integral to the customer than to migrate single-point services. Addressing customers needs is surprisingly simple: Using thirdparty services allows providers to choose the best-of-breed services for each particular aspect, meaning there is no need to compromise on quality. As technology evolves, new services from third parties can be added quickly and cheaply too; as the market evolves, providers can reach into new verticals simply by choosing new third-party services to include in its portfolios. These integrated services are also likely to attract greater gross margins, not just from the additional value generated, but also from a lower cost base. Fixed overheads mean that gross margins will grow with higher levels of consumption; only negligible increases in overhead are needed to resell 100,000 VMs to the customer, as opposed to 100. Self-service reduces the need for expensive sales staff to deal with every order and allows simple cross- and up-sell to new services. Pay-as-you-go pricing is only likely to encourage customers to self-serve with a greater volume of services as and when they need it. And as capital commitments are reduced and costof-sales can be directly attributed to consumed resources, the financial accounts are likely to look a lot more healthy too with potential reductions in bad debt and sunk costs.

12 8 Cloud Brokers FIGURE 2: ENTITIES INVOLVED IN BROKER AND TRADITIONAL IT PROCUREMENT CONSUMERS OF CLOUD SERVICES CLOUD BROKER SERVICE PROVIDERS INTERNAL BROKER SERVICE PROVIDERS SERVICE DELIVERY Distributor Value Adding Reseller BROKER ENABLING TECHNOLOGY PROVIDERS Cost Reporting System Integrator Transform & Integrate Decision Engine Enterprise Brokered Procurement Direct (Traditional) Procurement Cost Metering Cloud Management Platform Security PROVIDERS OF CLOUD SERVICES

13 9 451 RESEARCH SECTION 3 How Does It Work? 3.1 CLOUD BROKERS Cloud broker service providers manage access to and procurement of cloud resources up to and including owning the paper on the contract with the resource supplier and paying the bill. At one end of the scale, brokers can manage multiple clouds and move workloads into them with the consumer being billed directly by each cloud provider for the consumption that has taken place. At the other, a broker may buy and then resell resources to the consumer. It could be charging the customer directly for the resources it has already consumed, or it could wrap it into a higher solution price where the cloud component isn t visible. By taking advantage of instruments such as reserved instances, spot markets and on demand as well as wholesale and volume discounts, and other upfront commitments a provider may arbitrage its entire stock across the aggregated demand from customers and sell it on to them with a margin. In some cases, the cloud broker service providers will own the paper (the contract) for the resource contracts they manage and even procure. They must offset this cost by charging consumers enough that revenue exceeds the cost of these resources, and therefore a profit margin is achieved. Our research finds no single approach has any leading position. Dell, for example, owns the relationship (the paper) with the third-party suppliers; Capgemini, which will provide contract types, contract negotiation and vendor management to its broker customers, doesn t. Full cloud service brokers will deliver services from a self-service, user-operated master catalog. A decision engine will assess the suitability of service types to meet application and workload needs. A policy engine will govern what, where, when and how services may be provisioned. It can be optimized with different rules to support the CIO, LOBs, DevOps or other role-based needs. The key for brokers here is to preserve the agility and self-service model that led the business to adopt the cloud in the first place, while at the same time allowing IT to retain control. A billing engine consolidates all the metering information related to a specific customer account and provides automated billing. The engine triggers the provisioning of services via APIs. Performance management, incident management and user support are provided as a consolidated service. Key technology components include a decision engine that determines which services/ resources are the best fit and a transformation engine that provides workload and application migration. The cloud broker will typically package this as an offering to manage separate suppliers and deliver the SLA on behalf of clients. The cloud broker should be able to deliver as much management resolution as required, up to and including running the entire portfolio or enabling the customer to buy and implement the broker product/service but still manage the provider relationships itself. The broker may own contracts with cloud service suppliers that can be used by the customer, however, which party actually owns the paper on those contracts (the end user customer or the broker) isn t a default position.

14 10 Cloud Brokers 3.2 BROKERING THE SELFIE APPROACH A single cloud provider may offer a range of its own clouds both public and private hosted, and private on-premises. Enabling customers to choose any combination of these, including moving workloads between them, is one kind of brokering. VMware is an example of this. It facilitates the brokering of VMware services between on-premises use and its hosted vcloud Air (formerly known as vchs). Users can also access the vcloud Air Network of partners (VMware Service Provider Program, vcloud Director, etc.). Other service providers, such as CenturyLink, foreground the ability to use a package of services colocation, public and private IaaS, PaaS and developer environments that can be accessed and managed via the same portal and management tools. However, the commonly understood use of the term cloud broker implies access to multivendor services. For a service provider it means in some way offering and managing access to third-party services alongside native services. Many companies are adding access to and management of third-party services alongside their own. This is often brought on by a need to offer a public cloud service without having to develop it in-house. For organizations that do not already have a shared infrastructure cloud but plan to offer one, this will be the predominant model federating with Amazon Web Services (AWS), Azure and others. 3.3 DISTRIBUTORS-TURNED-BROKERS Ingram Micro and Arrow are examples of companies transitioning from IT distributors to cloud brokers by brokering access to cloud resources from a single location, with pre-negotiated discounts. These entities are similar to (or the same as) the IT distributors of old, as their role was to purchase hardware and software components for service providers and enterprises. The value distributors-turned-brokers offer is in providing consumers a single location from which they can access a range of products, and where negotiation and distribution is essentially outsourced. 3.4 CLOUD EXCHANGES AND BROKER-DEALERS A cloud exchange is a meeting place for sellers and buyers of resources. Two cloud exchanges are currently in development: Chicago Mercantile Exchange and Deutsche Borse are exchange providers working with broker-enabling technology vendors 6fusion and Zimory, respectively. Additionally, the Cloud Team Alliance and Helix Nebula in Europe also offer an exchange-type service for participants. A cloud broker may use an exchange to purchase and sell cloud resources on a provider or consumer s behalf. The resources are purchased as defined; the purchaser is responsible for architecting solutions using the acquired resources. Exchanges are also used by broker-dealers to purchase advance access to resources from a range of providers and then provide them to their consumers. The broker-dealer profits by obtaining a discount through the advance purchase of bulk resources; it keeps some of the discount for itself and passes some savings on

15 RESEARCH to consumers. The only such firm currently in the market is Cloud Options. It is likely that other broker-dealers will enter the market, but only if the exchanges achieve enough liquidity in the form of buyers and sellers. 3.5 CLOUD MARKETPLACES A cloud marketplace can also procure access to cloud resources on behalf of the consumer, while adding a level of value to the process. The marketplaces negotiate a price framework so that the marketplace and consumer save versus purchasing directly. The marketplace purchases resources on the consumer s behalf and then bills the consumer directly for consumption at the discounted rate. Offers typically bundle single sign-on (SSO), a single reporting pane, access control and simpler invoicing. The marketplace also takes away much of the architectural planning from the consumer and provider, usually allowing end users to buy resources (IaaS, PaaS and SaaS). Cloud marketplaces are similar to VARs that use many different providers and then help shape them into a single service. The cloud marketplace s value is in pre-negotiated pricing and tools to enable a single view of procurement. Most cloud marketplace vendors currently provide software that enables enterprises to act as their own brokers, including Verio, Jamcracker, ComputeNext and AppDirect. These companies still really act as broker-enabling technologies, specifically in the procurement sector. ComputeNext has a public marketplace that makes it both a cloud broker service provider and a broker-enabling technology provider. Cloud providers typically offer cloud marketplaces from which consumers can purchase cloud applications to be deployed as IaaS. In addition to deriving direct revenue through the sale, providers also benefit from increased IaaS consumption and offering a diverse range of products to meet customer needs with little cost or effort. AWS, Rackspace, IBM, Oracle, HP and CenturyLink, among others, provide such marketplaces. Because these services are being deployed on the providers own cloud, the providers cannot really be classed as cloud brokers. New entrants here include the datacenter and colocation operators, which are creating a form of cloud marketplace in which enterprises and vendors within their ecosystem can buy/sell directly within that network. Equinix, Digital Realty and Switch are examples. They foreground the benefits of the proximity and fast interconnections of operating in the marketplace, as well as their direct network connections to IaaS providers. Other vendor-led marketplaces include Dimension Data s OneCloud (in which the 15 partners report that on average 22% of revenue generated across the program is transacted between partners); OnApp s Cloud.net federated marketplace; Virtustream; and possibly Cisco Inter- Cloud though it is unclear at this time what the end state for it is intended to be.

16 12 Cloud Brokers In the US, the General Services Administration (GSA) is acting as a de facto marketplace for the federal government, crediting Akamai, AT&T, AWS, Autonomic Networks, CGI, CTC, HP, Lockheed Martin, Microsoft and IBM as FedRAMP-compliant cloud service providers. Indeed the GSA looks like a would-be cloud broker. If the GSA were to put a FedRAMP in place for cloud management vendors, it would likely start a feeding frenzy. The key actors in this space such as General Dynamics, Lockheed Martin, Unisys, ManTech, CGI, Accenture, Booz Allen and the SIs are now figuring out how to build, buy or partner their way into this market to be attractive to the federal segment. Although the GSA recently issued an RFI for cloud brokers, this is really an information-gathering exercise as there are no funded projects in the offing. Other examples include the UK Government G-Cloud initiative with its CloudStore and the EU s Helix Nebula Marketplace. 3.6 INTEGRATORS SIs see themselves as natural heirs to the service-integration market, which is ultimately how services delivered from various types of clouds will be procured and used. They are the highest level of outsourcing available to consumers. Integrators not only procure access to a range of cloud resources, but also facilitate the integration of these services and the use of data sources. They may fully control the architecture of the application, provisioning and scaling as required, to deliver to SLAs. Cloud service integrators combine cloud and non-cloud services to deliver a bespoke solution that is fully integrated, managed and scaled. Cloud integrators may pass on costs to consumers or may bundle them into a single solution price. From a commercial point of view this makes perfect sense: Rather than building vast infrastructures that can t compete on cost relative to the likes of AWS and Google, integrators can use a range of third parties that are not just more affordable, but also have specific expertise.

17 RESEARCH FIGURE 3: THE CLOUD BROKER MARKET LANDSCAPE CLOUD BROKER CATEGORY Cloud exchanges, cloud brokerdealers Cloud marketplaces EQUIVALENT TRADITIONAL ENTITY IT distributors VARs FUNCTION NEW PLAYERS REVENUE MODEL Provides consumers with a catalog of purchasable items from a range of providers, which consumers must control and architect Provides consumers with a catalog of purchasable items from a range of providers, with some level of integration (e.g., SSO) and pre-architecture Cloud integrators SIs Provides consumers with a catalog of purchasable items from a range of providers as part of a broader managed solution that is fully integrated Enterprise service managers Datacenter marketplaces/ exchanges Internal IT departments Datacenters Provides employees with a catalog of purchasable items from a range of providers via the organization s master catalog Enterprises and vendors within their ecosystems can buy/ sell directly within that network 6fusion/CME, Deutsche Borse/Zimory, Strategic Blue, Ingram Micro, Arrow, TechData Appura, ComputeNext; Cloud providers include: Amazon Web Services, Rackspace, IBM, Oracle, HP, Dimension Data, Virtustream, OnApp, CenturyLink, Dell, Bitnami Capgemini, Atos Canopy, Accenture, CSC, KMPG, Vodafone N/A Equinix, Digital Realty, Switch Exchange: transaction fee; broker: delta between cost and sale price. Percentage of consumer spend (15%) or delta between cost and sale price. Varies. Likely cost plus upfront and recurring fees. Monthly price determined by metered costs. Ranges from continued management of all IT costs that may use showback and chargeback to reallocated IT costs given directly to internal LOB budget holders. Colocation charges plus direct connect bandwidth fees.

18 14 Cloud Brokers SECTION 4 Broker-Enabling Technologies 4.1 REQUIRED TOOLS AND FUNCTIONS To act as a broker, the service provider or enterprise needs tools to manage multiple clouds from a technical point of view, including provisioning and turning-down resources, migrating workloads between providers, ensuring security compliance and preventing data leakage. Tools are also needed to ensure that the overall business strategy of operating internal ITaaS or generating company revenue is met. These include tools for measuring consumption and allocating to users, reporting on performance and establishing necessary contracts with cloud providers. Cloud Management Platforms: Workloads need to be provisioned and managed across multiple cloud entities under a single, unified point of view, typically using APIs. Cost Management Auditing and Metering: Brokers need to ensure they are metering the customers consumption of cloud resources for billing purposes. An external broker will bill customers for this consumption; an internal broker will bill departments or business units. Cost Management Reporting: Data must be collected from each service provider to assess cost, performance and usage. This is typically done through APIs or data files kept in object storage platforms. Decision Engine/Procurement: To purchase resources from multicloud vendors, multiple accounts and pre-negotiated contracts are needed, including recommendations on best fit included. Security Services: Appropriate security is needed to ensure that provisioning is authenticated and attributed, and data is kept safe and compliant across multiple clouds. Transformation Engine/Migration: Brokers need to ensure they can move data and applications from cloud providers as changing requirements dictate, or even from on-premises cloud applications. These technologies can be provided as point or integrated services. ITaaS vendors usually provide full capabilities such that enterprises can define their own service catalogs from which departments and end users can purchase resources. This is the key value proposition for a private cloud: They allow enterprises to define the catalog and run the self-service portal that enables users to request resources, effectively duplicating IaaS behind the firewall. The majority of point broker-enabling technologies provide their capability through a SaaS platform on a recurring subscription model. The recurring cost depends on the amount of workloads or the cost of the workloads under management. For software delivery, a recurring license model is commonly used based on workloads under management.

19 RESEARCH FIGURE 4: BROKER-ENABLED TECHNOLOGY MARKET LANDSCAPE FUNCTION DEFINITION SAMPLE PLAYERS WITH FUNCTION AS PRIMARY FOCUS ITaaS cross-functional tooling Transformation engines Cost management reporting Cost Management Auditing and Metering Cloud management platforms (CMPs) Decision engine/ procurement Security services Provides end-to-end ITaaS capability Provides the capability to move workload between clouds Collecting data from multiple clouds to ascertain consumption Metering the delivery and consumption of IT resources Workload provisioning and termination across multiple clouds Has prearranged contracts that can be reused by those wishing to build their own broker services and provides recommendations Provides security, data leakage, authorization and compliance across multiple clouds BMC, CA, HP, IBM, ServiceNow, HP, VMware RiverMeadow, Racemi, RackWare, AppZero, CloudVelocity, ClouDesire, Appcara, GigaSpaces, RISC Networks, Kaavo, UShareSoft, Krystallize, Microsoft, Novell, AWS OpsWorks Cloudability, Cloudyn, CloudCheckr, CloudBolt, CloudHealth, CloudScreener, CloudVertical, RISC Networks, Semperity, AWS Ylastic, Datapipe, Akasia, KEDARit, Apptio, Xervmon Cloud Cruiser, Talligent, 6fusion, MetraTech Appura, Dell, RightScale, CA, BMC, CSC ServiceMesh, Cirba, Copper.io, Scalr, Xervmon, Ensim, Egenera, Ostrato, CliQr, Cognizant, CompatibleOne, Ensim, Gravitant, VMware, CloudMGR Jamcracker, Gravitant, ComputeNext, Cisco Inaya, Skyhigh, Skyfence, Elastica, CipherCloud, FireLayers, Adallom, Bitglass, Netskope 4.2 CLOUD BROKER AS PART OF A CLOUD MANAGEMENT PLATFORM Increasingly, a CMP won t be considered full-service unless it can deliver a cloud broker function that provides BEV capabilities. This might be delivered by an SI to customers or by an internal ITaaS provider to an organization. An SI will typically need cloud management technology to provision and manage workloads across multiple clouds; it will need to meter and bill customers for their consumption and report it back; and it will need to migrate workloads from existing platforms. It will also need contracts and procurement protocols in place with the providers it uses, together with a decision engine that can provide service selection. Figure 5 offers an example of a cloud management platform stack or catalog that includes a broker capability.

20 16 Cloud Brokers FIGURE 5: COMMON SERVICE OFFERINGS OF CMPS FEATURE Hybrid cloud networking Multivendor private, public, hybrid cloud support Blueprints (for services) vendor and user VM provisioning, high-availability scaling, recovery Developer tools (continuous delivery) Self-service portal, service catalog Integration/migration (transformation engine) Service selection: BEV/broker (decision engine) Consumption management/optimization Access control/security SaaS and on-premises license models App monitoring and system tool extensions (patching, backup, OS monitoring, etc.) SaaS, on-premises license models AUDIENCE DevOps, enterprise business DevOps, enterprise business Enterprise business DevOps DevOps DevOps DevOps Enterprise business Enterprise business DevOps, enterprise business Enterprise business DevOps, enterprise business Enterprise business