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Cloud brokerage market potential grows, but long-term future questionable

Third-party services are emerging to help businesses sort through the cloud decision-making process. But are cloud brokers worth the investment?

As the cloud market evolves and becomes more complicated, third-party cloud brokers have emerged to help enterprises make cloud purchasing decisions. Cloud brokers act as a support and distribution channel for IT departments, shopping around to find the best deal for their clients within the cloud service provider market.

Cloud brokerages, however, are in a nascent stage of development, and observers are split on whether they are just a fad or will become an accepted way to buy cloud services. And, like many IT terms, the term cloud broker lacks a precise definition.

Given how competitive the cloud firms are price-wise and how close to the company the decision needs to be, I'm not yet sure a cloud broker is a good idea.

Rob Enderle,
principal analyst, Enderle Group

"Cloud brokers today come in many flavors," said Dave Bartoletti, principal analyst at Forrester Inc. "It's a rapidly evolving term and can describe a role, as well as enabling technologies and services."

At a high level, brokers such as Gravitant Inc., Jamcracker Inc. and Parallels help corporations source, price, compare and procure cloud services. Once an enterprise signs on, often the cloud brokerage also takes on cloud management and accounting responsibilities. Ideally, cloud brokers provide decision makers with apples-to-apples comparisons of cloud provider pricing and functionality. Sometimes, they can negotiate lower pricing models than businesses can obtain on their own.

Having a cloud brokerage on your side

Organizations have different motivations for signing with a cloud broker. A company may choose to use brokers to find the best cloud price, or IT departments could rely on them to match their businesses' technical needs to the most appropriate cloud providers.

As cloud environments become more complex, brokers can help corporations integrate multiple systems from different vendors. The National Institute of Standards notes that cloud brokers sometimes provide unified and enhanced management interfaces to multiple cloud services. Such features include supplying federated cloud-subscriber credentials to multiple cloud providers and delivering federated access to multiple cloud provider application program interfaces.

For example, if a company needs to set up public-facing, high-volume webpages, it might turn to Amazon Web Services. But it may need other services, such as Microsoft's Windows Azure, to support an internal collaboration system. A cloud broker helps identify the services that best fit a company's existing cloud environment, helps identify the most appropriate vendor for integration and takes on some of the ongoing functions -- for instance, working with businesses to first establish and then monitor a provider's compliance with service-level agreements.

Downsides of the cloud broker model

No IT option is perfect, and cloud brokerages have potential downsides. Like other third parties, brokers have relationships with a finite number of vendors. While they offer corporations vendor choices, their repertoire may lack the service or provider that would best fit a company's IT environment. In addition, kickbacks or incentives may prod a broker to push a less-than-optimal cloud service to a customer.

Hiring a broker complicates the contracting process. In a contract with a cloud broker, enterprises do not have direct access to their cloud provider, which can complicate matters if a company wants to switch brokers but maintain a relationship with the vendor. Problems could also arise between the broker and provider, sticking an enterprise in the middle and forcing them into a cumbersome migration to another vendor.

Experts are split on the brokerage market's long-term prognosis.

"Given how competitive the cloud firms are price-wise and how close to the company the decision needs to be, I'm not yet sure a cloud broker is a good idea," said Rob Enderle, principal analyst at the Enderle Group.

William Fellows, vice president of research EMEA at Boston-based 451 Group, however, is a believer. "In a few years, I expect a lot of the cloud services to be sold by brokers," said Fellows.

About the author:
Paul Korzeniowski is a freelance writer who specializes in cloud computing issues. He has been covering technology issues for more than two decades, is based in Sudbury, Mass., and can be reached at

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I think a key reason there is confusion around the CSB model is that there are 2 different models here:
1) CSB as a 3rd party provider, as described in this article. Increasingly these will be MSPs of different sizes who are serving their customers, who are typically mid-sized enterprises.
2) What's not mentioned here is the role that large Enterprise and Gov't IT Organizations themselves will play as a CSB. In this case, CSB enablement SW (such as Jamcracker's) enables the IT Organizations to aggregate, integrate and customize external and internal cloud services to meet the needs of their internal LOB customers.
As a provider of advisory services to small business I see my role as that of an "honest broker" - researching the needs of clients and finding the best technology solutions for their business needs.

The biggest needs I see with my clients are:
1. Making sense of the myriad of IT services available from all technology providers - cloud or otherwise.
2. Making efficient long term spending decisions - not ones based on short term demands or pressure from the technology provider in front of the business owner at the time.

The key challenges (as noted in the article) are:
1. Commissions - I turn them down to avoid the temptation to push services from which I get an incentive.
2. Keeping up to date with everything that is available in a rapidly evolving space - on this I rationalise that I certainly know more than my clients and I know when and where to look for more information when the client's needs dictate. Each client is treated as unique and we don't simply re-package solutions provided to others.

In short, I think for organisations without a dedicated IT function there is a place for brokers - but only where they're honest with themselves and their clients. If brokers don't look after the client's needs then the long term prospects are grim.