The role of a Cloud broker

Cloud computing is without doubt the buzz word of the moment. A survey by CIO undertaken this year indicated that opinion of it as a “most important visionary plan element” had risen to third place in the rankings, thanks to a doubling in the interviewees’ rating over the last two years.

Cloud services, or ‘as-a-service’ offerings, proliferate as more and more suppliers hop on the bandwagon.

So what does that mean for CIOs and consumers? It means it is becoming complicated! And choosing the best service and service provider is increasingly difficult, and possibly increasingly risky.

Enter the Cloud broker

What are Cloud brokers? Gartner defines them as “a type of Cloud service provider that plays an intermediary role in Cloud computing”. In other words, they act on your behalf to sift through the various offerings and help or advise you on what’s best for your needs, and if indeed Cloud options exist that will suit you.

This definition might be a bit broad, as it could include suppliers of one product which offers a range of ancillary suppliers. There are variations on the theme, which we’ll come to later, but the basic role is similar to, but more complex, than a mortgage or insurance broker — somebody who is independent of Cloud service providers, who will find you the best deal, and who is hopefully not influenced by the commission received from the providers.

In-depth: Legal issues in the Cloud.

Who are the Cloud brokers? Frankly, many who say they are, aren’t. In the course of preparing this article we were flooded with PR companies putting their clients forward as brokers.

In virtually every case, the ‘brokers’ were no more than companies offering a range of ‘as-a-service’ products, with these being either their own services or those of close partners. In other words, salespeople offering a selection from their existing portfolio. Some were ‘half’ brokers, such as telecoms hardware suppliers who will set you up with a carrier of your choice, similar to the way some homebuilders might ‘broker’ a deal with mortgage providers.

This might be because, as Gartner’s Cloud computing hype cycle puts it, brokerage is down in the bottom left of the curve — the ‘technology trigger’ area — with adoption five to 10 years away. Even so, it predicts that “through 2015, Cloud service brokerage will represent the single largest revenue growth opportunity in Cloud computing”. Some players, however, are not so guarded about the time it will take for the industry to mature.

Marcus Fraumano, general manager of Data Centre eXchange (DCX), says five years is too conservative. Fraumano claims his firm is the only true independent Cloud broker in Australia. He admits that customers are not actively seeking the services of a broker, and general market awareness is weak, but he does say, “I think people will quickly recognise that the broker is adding value in a number of ways”.

“The Cloud computing market is still relatively immature, and this immaturity extends through to the understanding of the role of a broker.”

The role of a broker

What is that role? Brian Prentice, research vice-president for Gartner — one of the key commentators on Cloud brokerage — suggests there are three models for the broker’s role, each increasingly sophisticated. A broker who lines up a single supplier for a single task is probably not doing CIOs any great favour. This is what mortgage brokers do. True models of Cloud brokerage are more involved.

Firstly, Prentice says, there is ‘compositing’, which means taking bits and pieces of others’ services and packaging them together. It makes life less complex for CIOs by having somebody else vet the various suppliers. Prentice says it also means that other brokers can come in and duplicate the service, which is bad for brokers but possibly good for customers.

The second model involves compositing but the broker adds its own intellectual property (IP). It could be a proprietary service in its own right, or it could be the ‘binding’ tool that glues service suppliers’ products together. The mode of delivery (interfaces and so on) could also be an IP value-add.

Thirdly — and this is Gartner’s recommended model for brokers — is the service as ‘property’, or platform provider, in the same way a retailer’s floorspace is rented out to other suppliers. Picture cosmetics stands in a large department store where the store owns the building and the make-up and perfume companies pay for the floorspace.

It is a similar situation in supermarkets, where the operator takes a fee from a supplier in return allocating premium spots with the most exposure, or even to including them at all in the product range.

The question here, of course, is how independent a broker becomes if they have a relationship with specific ‘floor space renters’.

“We cannot be truly independent in the sense we need a formal relationship with vendors to be paid the commission that accrues,” Fraumano says.

“However we are independent in that we are not constrained by the portfolio of any single vendor. The key for us is that the Cloud solutions we recommend are based on what will best suit the client.”

So, do you buy direct or use a broker? Considering brokers receive a commission, it may not be the least expensive option. CIOs must also consider what value, if any, is added to the end product.

According to Gartner, “Cloud services brokerage makes it easier, safer and more productive for companies to navigate, integrate, consume, extend and maintain Cloud services, particularly when they span multiple, diverse Cloud services providers”.

Prentice adds, however, that the more complex a supply chain becomes — and brokers place themselves as one element in that chain — the more opaque the value chain becomes. Each level must be sure of the quality of other service providers. There is an inherent risk; if one element breaks down or fails to supply, the whole chain is in danger of collapse. The complex supply chain, then, could increase risk rather than decreasing it.

James Foster, chief technology strategist at SAS Australia, makes the point that, as far as he’s concerned, it’s the one-on-one relationship between the supplier and the customer which is vital. If brokers withdraw from the day-to-day activities of the Cloud-customer relationship once a deal is struck, including implementation, the CIO is back to dealing with a range of suppliers individually.

It is the very thing the broker role was supposed to obviate. If brokers continue to play a role beyond making deals — adding value and IP — then they may have a role in the future.

At the moment, however, the market is immature. There are a few players and perhaps fewer customers, many companies are not offering true brokerage and many customers still unsure of the nature and benefits of Cloud. For now, the question remains: Is brokerage worth it, or is it simply a hyped concept of another hyped concept?

Follow CIO Australia on Twitter: @CIO_Australia

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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