Cloud Broker &#8212 New Business Model Paradigm

August 10, 2011 | Updated: September 22, 2011
Cloud Broker A New Business Model Paradigm

by Stefan Ried, Ph.D. for Vendor Strategy Professionals
Making Leaders Successful Every Day
For Vendor Strategy Professionals

Deriving More Business And Economic Models From Cloud Computing
by Stefan Ried, Ph.D. with Pascal Matzke, Jean-Pierre Garbani, and Reedwan iqbal
ExECUt i V E S U M MA Ry
One of the key principles of cloud computing is the sharing of resources across various infrastructure domains and locations. As more clients get to use the different resource pools available and overall resource elasticity grows and matures, new business models will emerge around the reselling and integration of available resource pools: Enter the cloud broker business model. This report defines the current and future business models around cloud computing and outlines why the cloud broker model represents the most promising, but also the most ambitious, cloud approach. It shows why it offers IT and telecom service providers but also other vendors the timely and unique opportunity to overcome the rapid commoditization of their existing services business and build a sustainable, more margin-rich service delivery model. Vendor strategists need to start today to make themselves familiar with the implications and challenges at hand, as the first providers will take cloud broker offerings to market within the next 12 months.
tABl E o F Co NtE NtS

2 Picking Your Place In The Cloud Value Chain Forresters Cloud Computing taxonomy Helps identify your Positioning traditional Business Models Evolve into New Cloud Segments 6 Understanding The Cloud Broker Business Model the Brokers Value Proposition is Based on the interoperability of Private And Public Clouds 11 Potential Players In The Cloud Broker Space Component Vendors Make Up the Cloud Broker Supply Chain Cloud infrastructure Providers Potentially Evolve into Early Cloud Brokers
RECoMMENDAtioNS
N ot E S & RE S o U RCE S
Forrester interviewed more than 30 cloud tool vendors and service providers, including 6fusion USA, Akamai technologies, Appconomy, AppDirect, Apprenda, Aria Systems, Capgemini, Cloud.com, CloudSwitch, Colt technology Services Group, Computer Sciences Corporation (CSC), ComSci, Cordys, Equinix, fluid operations, Fujitsu, Getronics/KPN, GreenButton, iBM, Jamcracker, layer 7 technologies, Microsoft, Morphlabs, Rackspace, RightScale, rPath, SafeNet, salesforce.com, t-Systems international, UShareSoft, Verizon, Virtual Ark, VMware, and Zuora.
14 Embrace The Cloud Broker Model To Drive Sustainable Growth And Margins 15 Supplemental Material
Related Research Documents Sizing the Cloud April 21, 2011

Cloud orchestration Models February 11, 2011 the Evolution of Cloud Computing Markets July 6, 2010
2011 Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRankings, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective owners. Reproduction or sharing of this content in any form without prior written permission is strictly prohibited. To purchase reprints of this document, please email clientsupport@ forrester.com. For additional reproduction and usage information, see Forresters Citation Policy located at www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.

PICkInG YoUR PlACE In ThE CloUD VAlUE ChAIn The cloud market continues to attract a large number of players from widely different technology and business backgrounds. While many new vendors appear in the cloud space every month, most of the established software vendors, information and communications technology (ICT) service providers, and IT consulting firms are trying to extend their existing portfolio with cloud-related offerings. Given the diversity of players and the still immature state of the market, picking the right place in what is an emerging space and building the right business model represent significant vendor strategy challenges. For this report, Forrester interviewed vendor strategists at more than 30 leading and emerging cloud vendors to discuss and identify possible business models and value propositions around cloud computing. It quickly became clear during these discussions that many vendor strategists continue to struggle to define the cloud space they are operating in and that value propositions remain moving targets. But the interviews also revealed similarity across different business approaches, which eventually will lead to the emergence of totally new business models for cloud computing. In particular, the cloud broker business model is emerging as one of the most promising and ambitious models because it offers a unified approach to virtually all cloud segments from infrastructure-asa-service (IaaS) to people-as-a-service or end-to-end business-process-as-a-service (BPaaS). Forresters Cloud Computing Taxonomy helps Identify Your Positioning For clients, vendors, and market observers, cloud computing to this day represents a confusing battle ground. The confusion is made even worse because many vendors are misusing the cloud term to market traditional products and services that dont actually show any of the typical characteristics of cloud, such as standardization, pay-per-use, or self-service. To provide structure to this puzzling picture, Forrester developed a market taxonomy defining 12 distinct cloud market segments across the different levels of resource sharing from private cloud to public cloud (see Figure 1).1
2011, Forrester Research, inc. Reproduction Prohibited

Figure 1 Forresters Cloud Computing taxonomy

Shared Public cloud IaaS PaaS SaaS BPaaS Pure cloud market
Virtual private cloud
Dynamic infrastructure services
Cloud-based integration (CBI)
Dynamic apps services
Dynamic business process outsourcing services
Extended cloud market
Private cloud Private
Infrastructure virtualization tools
Middleware virtualization tools
Apps virtualization tools
BP virtualization tools
Infrastructure Technology
57809
Middleware
Applications
Information and processes Business process

Source: Forrester Research, Inc.
Each of the 12 different cloud market segments represents different levels of maturity and adoption speed and hence also provides for different market opportunities in terms of market size.2 However, two general trends are emerging on opposite sides of this picture:
Infrastructure cloud markets are commoditizing quickly. IaaS in the public cloud is the most
commoditized cloud segment today; its trajectory will mimic that of the traditional hardware space following Moores law.3 Many IaaS offerings are already interchangeable and wholly standardized. For example .NET or Java workloads can be deployed across multiple IaaS options without any change. Recent trends in platform-as-a-service (PaaS) unveiled a broader variety of platform options for example, for Java Spring or Business Process Modeling Notation (BPMN)-based workloads.4
New markets are evolving around the pooling of human resources. While the cloud-based
infrastructure and middleware segments are essentially utilities, one can also imagine using the cloud to pool human resources. As an example, imagine a large retail organization that currently operates a call center for phone order entry services based on a software-as-a-service (SaaS) customer relationship management (CRM) application. The firm may be able to operate

this call center efficiently with their own staff during periods of normal demand. However, the firm can also support peak loads (i.e., during the Christmas period) or unpredicted bottlenecks with additional people acting on the same standardized business process. If there is no longterm contract and these additional people-as-a-service are available at short notice, Forrester considers this to be a business-process-as-a-service (BPaaS). Traditional Business Models Evolve Into new Cloud Segments Before we discuss the various cloud business models and their potential benefits, we need to explore the relationship between the traditional value contributions of independent software vendors (ISVs) and service providers and the new cloud computing markets. Taking the traditional hardware business out of the equation for a moment, there are three traditional provider business models that contribute to the cloud value proposition:5
Pure packaged software models. This pertains to the business of developing and selling
traditional packaged business applications, middleware, databases, and all kinds of software tools.
Pure consulting models. This pertains to the business of providing traditional IT consulting Pure infrastructure models. This pertains to the traditional IT outsourcing and hosting
services business, including telecom managed services.
services for systems integration scenarios, custom application development, or business process management solutions.
Because these traditional business models are starting to converge in the cloud computing space, we now see them evolving into seven new cloud business models (see Figure 2):

Figure 2 traditional Value Contribution Models Provide A Mix of Cloud Value Propositions
Pure software model
Cloud tool vendor
Cloud value-added reseller Cloud broker
Cloud builder
Pure consulting model
SaaS provider
Cloud integrator
Cloud infrastructure provider
Pure infrastructure model

57809 Source: Forrester Research, Inc.
Cloud builder. Although this may not seem obvious, consulting models also exist in the cloud.
The cloud builder helps enterprises establish the required technology and business strategy needed to build a private cloud. For example, IT service providers like Capgemini, CSC, HP, and IBM maintain blueprint road maps and playbooks for building private cloud infrastructures. Some cloud builders even address local cloud providers, which use these consulting services to build their virtual private cloud infrastructure.6
Cloud tool vendor. These ISVs offer licensed software tools, which help enterprises and cloud
providers build and provide their cloud services. Companies in this category include specialists like Cloud.com, Eucalyptus Systems, and RightScale as well as larger players like IBM, Microsoft, Oracle, and VMware. The private and virtual private cloud segments are again the best target markets for this new value proposition, as public cloud providers develop many tools on their own and leverage open source solutions extensively.
Cloud infrastructure provider. Although fairly similar to the traditional IT outsourcing model,
vendors in this category provide infrastructure and hosting services specifically for cloud needs. The key characteristics of the offerings include highly standardized and virtualized data center infrastructures as well as the supplying of the appropriate service provisioning and billing platforms. Vendors in this space include Amazon.com and GoGrid as well as traditional hosting providers like Rackspace and T-Systems International with virtual private cloud offerings.

Cloud integrator. This model is pretty close to the traditional systems integrator value
proposition with its mix of consulting, integration, and hosting offerings. However, the skills of a cloud integrator have evolved significantly beyond that. For example, the traditional expertise around traditional middleware is extended by the knowledge of configuring cloud-based integration (CBI).7 Traditional IT service providers like HP, IBM, and T-Systems International have started to focus on this opportunity more explicitly as an extension of their traditional business. IBM, meanwhile, underpins its service offerings in this space with an integrated product suite that it evolved in particular through the acquisition of Cast Iron Systems in 2010.8
SaaS provider. Probably the most mature and prominent of all the cloud business models,
specialist software providers like NetSuite, salesforce.com, and Workday offer business application functionality as a service over the public cloud. Because this model requires the converged skill sets of traditional ISVs and hosting providers, the cloud-native pure plays drive most of the growth and innovation while many traditional software vendors struggle to catch up.
Cloud value-added reseller (VAR). While the assumption in the early days of cloud computing
was that self-service provisioning would eliminate the reseller model completely, an increasing number of SaaS providers are using a VAR channel to manage local subscriptions. Companies like Capgemini are, in many instances, acting as resellers of SaaS subscriptions and provide additional services around customization and integration with core systems.9
Cloud broker. Last, but not least, the cloud broker represents the most complex business model,
offering a wide value contribution in the emerging cloud space. Essentially, this model leverages skills and capabilities from all three of the traditional business models of software, consulting, and infrastructure. We dedicate the following sections of this report to this new business model.
While startups would do better to focus on a single element of value contribution, many established vendors are taking a portfolio approach. For example, hardware vendors like Dell and HP are leveraging their IT services business units to provision cloud builder and cloud integrator offerings. These players run their hardware and services businesses in separate business units to avoid channel conflicts. Meanwhile software vendors, consulting firms, and hosting providers are transforming their portfolio to offer some cloud services in addition to their traditional non-cloud services out of the same business unit. UnDERSTAnDInG ThE CloUD BRokER BUSInESS MoDEl Although cloud computing is probably still two decades away from being a commoditized utility, the underlying delivery models will follow those of other utility business models. For example, high standardization in electricity grids has moved the entire industry away from flat, volume-based pricing for industrial consumers to the spot pricing of todays smart grids. Sophisticated smart grids not only exchange capacity between power plants of the same kind across countries, but they

also balance the capacity of renewable wind and solar power sources with that of traditional power plants. The price fluctuates according to the actual source of the electricity. Forrester believes that the cloud broker business model is going to evolve around similar dynamics and adoption patterns:
Simple broker: dynamic sourcing within one cloud segment, such as public cloud IaaS. Most
providers of public cloud IaaS offer simple pricing independent of the time or actual load on their infrastructure. However, as price pressured increase and IaaS and PaaS standards evolve, the price of compute power will start to fluctuate. Providers will very likely offer spare capacity at simpler service-level agreements (SLAs) for a lower spot price on short notice. Dynamic sourcing based on spot pricing fuels the next obvious economic benefit. Traditional IT users will not be able to keep track and will welcome a cloud broker, which will act rather like a travel agent (see Figure 3). Based on the workload classification, IT users will decide between a private resource like a private car and a shared cloud resource like public transportation. Just like a travel agent, the cloud broker will provide the best sourcing option for a cloud service, provision it automatically, and provide a consolidated bill.
Full broker: dynamic sourcing across public, virtual private, and private clouds. Some
workloads can, both technically and in terms of compliance, be deployed in different cloud models. Stretching the travel agent analogy, you could make some national trips by plane or train or in your company car. Logistics companies like DHL International or FedEx, for example, have corporate fleets of cars and their own airplanes but they also leverage air-cargo capacity or other freight carriers like Lufthansa Cargo. The decision to route a parcel via a companys own logistics network or via a mixture of its own cars and airplanes or shared airplanes and trucks are made extremely dynamically. The logistics business is obviously a very mature business. Forrester predicts the same level of mature dynamic sourcing across owned and shared infrastructure, applications, and people as the ultimate evolution of all cloud computing business models.
While cost reduction was initially the prime motivation for adopting cloud, a recent Forrester survey revealed that better infrastructure elasticity and reduced time-to-market for new platforms and applications have become equally or even more important to decision-makers.10 And if agility and flexibility are the overriding argument for clients to buy into the cloud, then the cloud broker will become an inevitable proposition for future cloud growth.

Figure 3 the Simple Cloud Broker Business Model Similar to A travel Agent
Shared Public cloud Find, compare quality and availability, book, invoice, insure, etc.
Virtual private cloud
Public transportation
Travel agent
Simply use Private cloud Private Private cars Infrastructure Technology

57809
Describe stable policies, negotiate conditions, delegate booking
Information and processes Business process

Source: Forrester Research, Inc.
The Brokers Value Proposition Is Based on The Interoperability of Private And Public Clouds 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. The full broker goes far beyond this. It uses cloud bursting to provide IT users with higher value for a lower price. The providers of the new cloud broker model will still have a higher margin than with commoditized IaaS services. Forrester defines cloud bursting as follows:11 Cloud bursting is the dynamic relocation of workloads from private environments to cloud providers and vice versa. A workload can represent IT infrastructure or end-to-end business processes. The key source of new margin is the industrialized implementation of a cloud-bursting management infrastructure and process framework (see Figure 4). By harvesting the spare resource capacity of all three cloud domains private, virtual private, and public clouds the cloud broker finds enough resources to offer to clients. For example, the broker can provide a virtual virtual machine at an even lower price point than a commoditized IaaS offering, such as Amazon Web Services (AWS). The cloud brokers business model basically involves sharing this price advantage with the IT user while keeping a healthy margin of 5% or more for the actual broker service.

Figure 4 the Full Cloud Broker Business Model
Cloud resources Public cloud e.g., development, test, simulation
Not transparent
Transparent to customers Cloud broker business model Workload management Workload classication Capacity planning Price prediction Performance mgmt. Conguration mgmt. Demand value-add Enterprise infrastructure Business applications Mobile applications Desktop services
Enterprise
Static policies Aggregation Service orchestration Provider contracting Resource selection Identity mgmt. Autonomous sourcing Dynamic sourcing Service operations Dynamic routing Capacity mgmt. Performance management Dynamic sourcing
Demand
Virtual private cloud e.g., productive, front oce
Private cloud e.g., productive, back oce + all other workloads
Elasticity management SLA compliance Metering Dashboards, monitoring Business transaction monitoring Billing/chargeback
CIO Governance
Delivery value-add Usage
Non-cloud managed services Productive legacy applications on own, but managed infrastructure; spare capacity now contributes to the private cloud.
57809 Source: Forrester Research, Inc.
Vendor strategists looking to build a full cloud broker strategy need to take the following key components and process steps into account:
Embrace the cloud principles of standardization, self service, and pay-per-use. Service
standardization will have to become the key design point for cloud broker offerings if they are to help CIOs facilitate their internal governance and standardization strategies for individual IT users. The consumerized mobile app stores will merge with traditional Information Technology Infrastructure Library (ITIL)-based service catalogs to form a new service app store; this will offer enterprise infrastructure (e.g., virtual servers), business applications (e.g., a subscription-based account for the corporate ERP system), a selection of public and corporate mobile apps, and, finally, traditional desktop services (e.g., a memory upgrade for your desktop computer).
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Introduce sophisticated workload management. The broker will have to offer next-generation
enterprise workload management. As discussed, not all workloads are applicable to cloudbursting scenarios. Some workloads might always have to be operated in a traditional managed services way. However, the goal is to handle as many workloads as possible through the broker, even if the workload classification unveils a very limited applicability for cloud. Understanding the non-cloud workloads will be invaluable for a broker; it can leverage this knowledge to utilize traditional private infrastructure capacity for those workloads that can go into the cloud on a temporary basis.
Aggregate multiple service combinations. Providers are already offering mashup approaches
to clients. Some elements of the business logic might be located on a mainframe and some in a Java application that is hosted in the cloud. However, current operating models point to a specific cloud location, such as an Amazon Elastic Compute Cloud (EC2) instance. The new service aggregation assumes that the endpoints can vary: Some instances of the Java app might be on Amazon, some on Rackspace, and others on private infrastructures that leverage tools from vendors like Eucalyptus or a private OpenStack cloud.
Perform dynamic sourcing which is invisible to the IT user. Leveraging state-of-the art
performance management and monitoring solutions, the cloud broker will identify the best sourcing option for those workloads that can go in the cloud. This will facilitate the dynamic sourcing and provision inherent in the cloud broker value proposition. While workload management and the creation of multiple resource aggregation options remains static, dynamic sourcing will constantly look for alternative locations for workloads. The concept will stimulate the shift from plain virtual-machine-based infrastructure to PaaS, as these platforms have a higher understanding of the application itself.
Enable transparent elasticity management. The cloud broker will relocate all the workloads
that are suitable for the cloud in an autonomous and proactive way without seeking prior approval from the end user. But enterprises will want assurance around SLA performance and will want to monitor closely the performance that is finally delivered and the costs involved.
Of course, this cloud broker business model represents a vision for the future. Some of the required components are scattered across different existing offerings like IT management software, business transaction monitoring, and modern billing solutions. There is even an early example of a successful broker service for SaaS business applications.12 However, a lot of functionality, such as the autonomous policy-driven cloud bursting, is not available in any packaged solution today. Providers of cloud broker business models will need to develop the missing pieces on their own. But vendor strategists also need to realize that the broker model moves cloud computing far beyond the sharing of hardware or software resources. Based on the framework of Forresters cloud computing taxonomy, we envision the broker model becoming a key facilitator of BPaaS offerings in which shared people resources become the real value proposition. It is absolutely crucial for a full cloud broker to convince the customer to grant wide access to the management of private on-premises infrastructure or even staff in the case of BPaaS.
August 10, 2011 | Updated: September 22, 2011 2011, Forrester Research, inc. Reproduction Prohibited

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PoTEnTIAl PlAYERS In ThE CloUD BRokER SPACE In our interviews with more than 30 different vendors operating in the cloud space today, we also tried to identify which of the current cloud infrastructure providers, cloud tool vendors, and cloud builders could play in the cloud broker space going forward. Our research unveiled two different categories of players. Component Vendors Make Up The Cloud Broker Supply Chain Many vendors contribute components vital for building a cloud broker strategy and infrastructure. Looking at the different elements required, we see the following categories of players in the cloud broker supply chain:
Metering solutions. For example, 6fusion USA is a fairly new vendor that focuses on the
metering of complex cloud deployments. We also see some new metering functionality around the billing vendors and new metering capabilities in traditional IT monitoring tools.
Content delivery networks. Akamai Technologies is a leading content delivery network (CDN);
it is already accelerating multiple Internet interactions beyond its original CDN business. The cloud broker will be able to push Akamai-accelerated cloud apps to different locations.
New service app stores. Appconomy, AppDirect, and Jamcracker provide app store
functionality in different forms. Jamcracker provides a large number of the additional capabilities needed for a cloud broker model.
Multitenant management and SaaS-ification. Apprenda offers a PaaS layer that can
be deployed to create a public or private PaaS, along with provider- and subscriber-portal functionality to turn traditional .NET apps into SaaS offerings. This will help brokers collect enough applications for their service app store.13 Virtual Ark offers a combined technology and outsourcing approach that turns traditional enterprise applications into SaaS offerings, which will provide important content for a cloud brokers service app store.
Billing engines for subscriptions. Aria Systems and Zuora are the two leading billing engines
focused on cloud-based subscriptions. ComSci goes beyond cloud billing and offers aggregation of the entire IT technology portfolio with finance capabilities such as cloud utilization and cost consolidation as well as traditional opex expenses from all managed and shared services.
Private cloud enablement. Cloud.com, Eucalyptus Systems, and the open source OpenStack
Software initiative are the most important technical approaches to turn private infrastructures into private clouds, using the same principles and application programming interfaces (APIs) as the major public cloud environments. SpotCloud already offers a simple marketplace approach: While it simply connects available spare capacity in private clouds to external consumers, it does not automatically execute sourcing decisions based on policies, as a cloud broker with sophisticated provisioning would.
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Sophisticated provisioning. Cordys is not only a leading vendor of a PaaS stack but it also
provides a framework for process-based provisioning of cloud resources; one of the early cloud broker initiatives used it.
Application virtualization tools. Fluid Operations is an innovative vendor that helps virtualize
commodity applications, especially traditional SAP systems on general-purpose hypervisors.
Cloud performance management. GreenButton and RightScale provide tools to manage
scaled-out applications and predict the performance and load. As a tool vendor, IBM provides a wide range of IT management software especially the IBM Workload Deployer, which handles the large environments of virtual machines.14
Virtual private infrastructure management. Microsoft is both a tool vendor and a provider of
raw cloud infrastructure with Windows Azure. While the Windows Azure platform appliance is still not on the market, it is promising for cloud-bursting scenarios. It would complement Microsofts own public cloud Azure operations with virtual private Azure appliances at virtual private cloud providers. Morphlabs partners with Eucalyptus Systems and Cloud.com to orchestrate hybrid scenarios between different cloud levels. rPath provides very sophisticated provisioning of virtual images and understands the application context to enable policy-based autonomous provisioning in different cloud levels. UShareSoft creates virtual appliances of virtualized packaged applications similar to rPath, but it focuses more on ISV/SaaS enablement.
Cloud security. SafeNet focuses on cloud security and enables far more applications to enter
cloud deployment than most enterprises assume while still complying with local (European) regulations. Layer 7 Technologies is a well-known security expert for SOA-based integrations; it is now extending its capability in distributed identity management and security to public and private clouds.
SaaS providers. As a leading SaaS CRM provider, salesforce.com basically represents many
SaaS providers. Although the solutions exclusively operate in salesforce.coms own data center, a cloud broker could offer value by reselling/managing pools of subscriptions or by managing the orchestration of other cloud solutions.
Cloud Infrastructure Providers Potentially Evolve Into Early Cloud Brokers It is important to note that, as of today, no cloud broker service is available on the market that would meet the capabilities described in this report. But vendor strategists should follow very closely the announcements of the following providers, as we assume that their advanced strategies will evolve into cloud broker models over the next 12 months:
Systems integrators with a cloud infrastructure offering. Capgemini has developed a strong
cloud practice around cloud builder, integrator, and VAR models, which enables it to push the broker model. CSC has a good understanding of the interoperability of different public

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clouds, and Forrester expects a simple broker service from it soon. Fujitsu and IBM have a huge portfolio of products as well as their own hosting capabilities, which they could assemble into broker services soon. IBM maintains several long-term relationships with existing hosting customers globally; the same applies for Fujitsu. IBM has already technically demonstrated cloud-bursting scenarios but leaves it to the customer to turn these into meaningful business models. Fujitsu recently showed SaaS enablement services around an emerging PaaS environment, which would provide critical application content for a broker service.
Pure infrastructure providers. Colt Technology Services Group (Colt) is a major European
provider of virtual private clouds and showed a lot of innovation potential as one of the early global VMware vCloud partners. Colt also benefits from trusted client relationships around its current managed infrastructure services. Equinix provides some of the most global networkindependent data center capacity; it is commonly used by other cloud providers under their own brands or for their own SaaS offerings. Forrester assumes that Equinix wont act as a cloud broker itself, but it will be able to offer spare capacity at very attractive spot prices to future brokers. Like Colt, Rackspace is a mature provider of virtual private cloud services but with more of a focus on North America. Along with a number of other cloud infrastructure providers, it showed a strong commitment to the open source cloud provider stack OpenStack. This will enable interoperable cloud management across all three cloud layers (private, virtual private, and public), which is a prerequisite for large-scale cloud-bursting volumes.
Systems integrators with a telco/network background. T-Systems International and Verizon
are the two international players that leverage the synergies of their large cloud provider capabilities and their own low-latency networks. Both could reassure enterprise SLAs about the dynamically distributed sourcing concept. Forrester has seen major investments by both providers in sophisticated self-service functionality around all kinds of cloud services. However, T-Systems International has a bigger footprint in the hosting of large-scale SAP environments, which gives it an amazing resource of private spare capacity for full broker scenarios. Thus, Forrester expects a more economically attractive broker concept in the next year from T-Systems International. Similar to Verizon and T-Systems International is the Getronics/KPN joint effort. As Getronics is owned by KPN, the network and infrastructure parts can also legally be weaved very tightly together with Getronics enterprise management services. We consider the Getronics/KPN strategy to be one of the most sophisticated in the market and among the first full cloud brokers globally.
In addition to IT service providers, CIOs of very large corporations could themselves act as cloud brokers in the future if they were to overcome the separation of private resources and resources from external providers dynamically. However, Forrester assumes that CIOs will wait for the first providers to offer broker services to see if the model actually works. The above-mentioned service providers have indicated more or less concrete plans for a full broker model to Forrester, but none of them offer it as of today. But Forrester assumes that the first nearly full cloud broker offering will hit the market by the end of 2011 or the beginning of 2012.
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R E C o M M E N D At i o N S
EMBRACE ThE CloUD BRokER MoDEl To DRIVE SUSTAInABlE GRowTh AnD MARGInS
the cloud broker model goes far beyond any current engagement models or available services proposition on the market today. Rather, it describes a future premium-level service offering for sophisticated services providers. the full cloud broker model represents the most ambitious and the most challenging of all cloud computing business models. But it offers services providers the unique opportunity to overcome the rapid commoditization of their existing services business and build a true service aggregation platform that they can leverage for a wide range of service portfolio elements. But the move toward a cloud broker model requires significant investments and strong executive commitment. therefore, vendor strategists should start with following steps.
Understand your window of opportunity. Forrester assumes that, initially, those it service
providers that are already providing cloud infrastructure on a virtual private level will enter this model. Some cloud tool providers have already developed many of the technical components required for the cloud broker business model and could offer partial broker services on their own to the market later. Finally, Cios who have turned their it organizations into profit centers to offer competitive cloud services could provide a full broker service to their lines of business. Strategy pros at large or innovative cloud providers must capitalize on their opportunity before these other two groups jump in.
Build trust with the right buyer stakeholders. Business units might buy a simple cloud
broker service directly instead of using static sourcing from a single cloud provider. However, the full cloud broker model requires access to temporarily available capacity within the private infrastructure as well. this requires a relationship of deep trust between the cloud broker and it departments. only very advanced Cios who have managed to build a mature private cloud and want to push the envelope even further will be the first buyers of a full cloud broker service.
Anticipate the market momentum. Forrester assumes that the first cloud broker offerings
will be available by the end of 2011. the first best practices from large-scale users of this emerging business model are not expected before mid-2012. Strategy professionals who have not started to evaluate the tools and business models (as such) need to do this as soon as possible to claim a stake in this young market segment.
Make investment money available. the cloud broker model is the most complex value
contribution of all the cloud computing business models. the broker is not only a cloud infrastructure provider but it also requires extended consulting skills to classify workloads and define dynamic sourcing policies with the Cios office. Finally, not all of the technical components needed to assemble full broker functionality are on the market. thus, an emerging broker needs to develop some components on its own and become a SaaS provider for these elements as well.

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SUPPlEMEnTAl MATERIAl Companies Interviewed For This Document 6fusion USA Akamai Technologies Appconomy AppDirect Apprenda Aria Systems Capgemini Cloud.com CloudSwitch Colt Technology Services Group Computer Sciences Corporation (CSC) ComSci Cordys Equinix fluid Operations Fujitsu Getronics/KPN EnDnoTES
1
GreenButton IBM Jamcracker Layer 7 Technologies Microsoft Morphlabs Rackspace RightScale rPath SafeNet salesforce.com T-Systems International UShareSoft Verizon Virtual Ark VMware Zuora
Forresters taxonomy of cloud computing markets provides vendors and customers with clear definitions and labels for cloud capabilities. With this taxonomy in hand, vendor strategists can position their offerings in the overall cloud market and better articulate their business value propositions to customers. See the July 6, 2010, The Evolution Of Cloud Computing Markets report. Based on Forresters previously published cloud market taxonomy, Forrester provided forecasts and information on 12 distinct market segments of cloud computing for the 10 years from 2010 to 2020. Note that, in this report, we forecast shifts in the usage patterns of infrastructure, platform software, and business applications. Readers should fully understand the definitions of each segment listed and the expected patterns of change to draw the proper conclusions from this forecast. See the April 21, 2011, Sizing The Cloud report.
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Moores law describes a long-term trend in the history of price/performance for computing hardware. Named after Intel co-founder Gordon E. Moore, who described the trend in a 1965 paper, Moores law predicts that the price for computing hardware will decrease every 18 months by 50% while, at the same time, the computing hardware will improve in performance by 100%. For details about Force.com and Google App Engine with VMware, please read Stefan Ried, VMwares Cloud Portability Promise Powered By Google, Stefan Rieds Blog For Vendor Strategy Professionals, May 20, 2010 (http://blogs.forrester.com/stefan_ried/10-05-20-vmware%E2%80%99s_cloud_portability_promise_ powered_google). Traditionally, value contributions in the tech industry can be grouped into packages: business apps, middleware and database software, and hardware and information and communication technology (ICT) services. The traditional hardware vendors are not explicitly shown here, as their model does not significantly change with the cloud. The emerging disruption to the hardware market is the buying pattern, which will shift in the long term from corporate enterprises toward cloud providers for a major portion of their hardware revenues. A cloud builder approach obviously does not work with public cloud providers, as they consider these skills to be their own core competence and will not hire consultants. Cloud-based integration (CBI) pertains to the provisioning of a standardized middleware platform in the cloud that can be used for various cloud integration scenarios (e.g., the integration of legacy applications into the cloud or the integration of different cloud-based applications into one cloud application). See the April 21, 2011, Sizing The Cloud report. Cast Irons OmniConnect cloud integration platform, launched in March 2010, is designed specifically to integrate public and private cloud services with on-premises applications, such as Lawson, Microsoft, Oracle, and SAP. Cloud platform partnerships include Amazon EC2 and Force.com, and SaaS partners include NetSuite, RightNow, and salesforce.com. An example of a cloud VAR relationship is Capgemini, which sold Google Apps Premier Edition subscriptions to Valeo, a European automotive manufacturer. The reseller deal was combined with cloud integration services, such as the migration of existing Microsoft Office documents to Google Docs, as well as unified identity management and single sign-on. For example, our recent software survey showed that software decision-makers want more flexibility, including the ability to choose different deployment options such as on-premises versus cloud services and new business models, such as subscription-based licensing. Source: Forrsights Software Survey, Q4 2010. For more details on cloud bursting, please read Stefan Ried, Cloud Bursting Stimulates New Cloud Business Models, Stefan Rieds Blog For Vendor Strategy Professionals, August 8, 2011 (http://blogs.forrester. com/stefan_ried/11-08-08-cloud_bursting_stimulates_new_cloud_business_models). For an introduction to the initial concept of a SaaS broker, see the February 11, 2011, Cloud Orchestration Models report.
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For an introduction to provider and subscriber portals, see the February 20, 2009, Forresters Platform-AsA-Service Reference Architecture report. Pixars Renderman, powered by GreenButton on Azure, offers a cloud rendering service for digital media studios and allows users to predict the calculation of duration and price depending on a jobs priority. The IBM Workload Deployer was, in its previous version, available under the name of WebSphere CloudBurst Appliance.
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For information on hard-copy or electronic reprints, please contact Client Support at +1 866.367.7378, +1 617.613.5730, or clientsupport@forrester.com. We offer quantity discounts and special pricing for academic and nonprofit institutions.
Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forwardthinking advice to global leaders in business and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs. For more than 27 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com.
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August 10, 2011 | Updated: September 22, 2011

Cloud Broker A New Business Model Paradigm

Making Leaders Successful Every Day

For Vendor Strategy Professionals

August 10, 2011 | Updated: September 22, 2011

Cloud Broker A New Business Model Paradigm

tABl E o F Co NtE NtS

Related Research Documents Sizing the Cloud April 21, 2011

Cloud Broker A New Business Model Paradigm

August 10, 2011 | Updated: September 22, 2011

2011, Forrester Research, inc. Reproduction Prohibited

Cloud Broker A New Business Model Paradigm

Figure 1 Forresters Cloud Computing taxonomy

Virtual private cloud

Dynamic infrastructure services

Cloud-based integration (CBI)

Dynamic apps services

Dynamic business process outsourcing services

Extended cloud market

Private cloud Private

Infrastructure virtualization tools

Middleware virtualization tools

Apps virtualization tools

Information and processes Business process

2011, Forrester Research, inc. Reproduction Prohibited

August 10, 2011 | Updated: September 22, 2011

Cloud Broker A New Business Model Paradigm

August 10, 2011 | Updated: September 22, 2011

2011, Forrester Research, inc. Reproduction Prohibited

Cloud Broker A New Business Model Paradigm

Pure software model

Cloud tool vendor

Cloud value-added reseller Cloud broker

Pure consulting model

Cloud infrastructure provider

Pure infrastructure model

2011, Forrester Research, inc. Reproduction Prohibited

August 10, 2011 | Updated: September 22, 2011

Cloud Broker A New Business Model Paradigm

August 10, 2011 | Updated: September 22, 2011

2011, Forrester Research, inc. Reproduction Prohibited

Cloud Broker A New Business Model Paradigm

2011, Forrester Research, inc. Reproduction Prohibited

August 10, 2011 | Updated: September 22, 2011

Cloud Broker A New Business Model Paradigm

Virtual private cloud

Simply use Private cloud Private Private cars Infrastructure Technology

Describe stable policies, negotiate conditions, delegate booking

Information and processes Business process

August 10, 2011 | Updated: September 22, 2011

2011, Forrester Research, inc. Reproduction Prohibited

Cloud Broker A New Business Model Paradigm

Figure 4 the Full Cloud Broker Business Model

Cloud resources Public cloud e.g., development, test, simulation

Virtual private cloud e.g., productive, front oce

Private cloud e.g., productive, back oce + all other workloads

Delivery value-add Usage

2011, Forrester Research, inc. Reproduction Prohibited

August 10, 2011 | Updated: September 22, 2011

Cloud Broker A New Business Model Paradigm

Cloud Broker A New Business Model Paradigm

2011, Forrester Research, inc. Reproduction Prohibited