Welcome!

@CloudExpo Authors: Liz McMillan, John Worthington, Stackify Blog, Elizabeth White, Jason Bloomberg

Related Topics: @CloudExpo

@CloudExpo: Blog Feed Post

Cloud Brokerage: The Market Unified

Commodity brokers don’t own the transport system for the market

This is Part III in a series by 6fusion Co-founder and CEO John Cowan on the emerging trend of Cloud Brokerage and the impact it will have on the technology industry and markets. Be sure to check out Part I of the series here and Part II here.

The feedback and fallout from Part II of this post has been quite interesting.  I thought for sure the bulk of the flack I would have to take would be from the cloud vendor incumbents I said would be relegated to the world of retail cloud business.  But since I posted my perspective I’ve found myself digging in to the nature of the Total Addressable Market (TAM) for the Cloud Brokerage industry.

For those of you keeping score at home, I said the market for cloud brokerage is more that 10 times the market for cloud computing software and related services.

Yes, 10 times.

And it is because this market is so big that cloud brokerage will spawn the next generation of technology innovation.

But before I get to the underlying technologies that are on the horizon and necessary for the future that I, along with my collaborators, envision, let me first spend a few paragraphs to explain why I am not just pulling numbers out of my, um, ‘IaaS’.

On the 6fusion iNode Network the median server in production in the cloud is a quad core dual processor unit with an average of 4TBs of available storage.  Using this standard configuration, partners and customers yield approximately $42,000 per year in net billable proceeds. I would classify that number, give or take on either side of it, to be a reasonable annual revenue estimation.

IDC recently reported that the 2011 server shipments topped out at 8.3 million units.  At a $42K clip, that is a market growing by a healthy $350 billion each year.

But of course, as we all know, server shelf life is not exactly the same as what you’d expect from a box of Krusty-O’s from the Kwik-E-Mart.

A quick trip down the hall to Gary Morris’s office at 6fusion is always an educational adventure.  “Depreciation,” Gary explains, “is a systematic and rational process of distributing the cost of tangible assets over the life of those assets. US GAAP calls for depreciation of servers using the server’s cost, estimated useful life and residual value. Typically, computers, software and equipment are depreciated over a period of 1 to 5 years, with the average useful life being 3 years.”

If we take Gary’s use of the GAAP average as a multiplier, it means there is estimated to be over $1trillion in billable utility computing presently in use around the world.

The point here is that cloud brokerage is underpinned by the availability of both private and public compute, network and storage resources.  And it is this massive untapped market that will drive the next wave of innovation.

If the origins of the cloud business belonged to the innovation of companies like Amazon, Rackspace and VMware, then the future of the cloud brokerage belongs to a new cadre of agnostic intermediaries that will enable a true utility computing marketplace to flourish.

The unification of the market is what I refer to as the point in time at which cloud computing technologies in production today can be used to interface to the commodity market.  In order for that to happen, cloud brokerage as an industry must form and deliver the underlying technologies necessary to make a true market.

Just what are these technologies?  Let’s take a look at three areas of innovation that will underpin the future of the utility computing.

Cloud brokerage technologies are best considered in the context of supply, demand and delivery.

Universal Resource Metering: Quantification of Demand and Supply

I delivered a presentation in Asia a few weeks ago and I opened with a slide that had two simple definitions:  Utility and Commodity.

A Utility, I paraphrased, “is a service provided by organizations that are consumed by a public audience.”

A Commodity, according to common definition, “is a class of goods or services that is supplied without qualitative differentiation.”

Theoretically, you can have a utility without it necessarily being commodity.  But it rarely ever works that way because in order to have a utility in the way we think about the utilities we consume every day, you must have scale.   And in order to achieve scale, the utility must be pervasive and uniform.  One should not require any special skills in order to use it.  It must be simple and consistent to use.   Think about your interaction with things like power or water services or subscribing to the Internet.

Utility is a word used quite often to describe the cloud.   In a post a couple months ago Simon Wardley aptly explained the difference between the cloud and a computer utility.  The difference, says Wardley, is really only that “cloud was simply a word used by people to explain something that really wasn’t well understood to people who were even more confused than they were.”

So is the cloud really a computer ‘utility’?  Not yet.

You see, what the cloud is missing is the factor that truly negates qualitative differentiation – common measurement. You simply cannot claim something to be a true utility if every provider measures services differently.  Common utilities all share the characteristic of universal measurement.  Think about it.  Power. Water.  Energy.  The Internet.  Whatever.

A standardized unit of measurement for the computer utility will be one of the greatest innovations to come from the emerging market for cloud brokerage because it will establish basis from which a commodity market can emerge.

Cloud Infrastructure Federation: Tapping Global Supply

When you buy corn or wheat or soybeans by contract on a commodity exchange today, you don’t buy a brand.   You buy a commodity.  Cloud brokers of the future will move commodities, not brands.   Today, cloud brokers form ‘partnerships’ with service providers.   But for a true brokerage model to blossom, there can be no possibility for vendor discrimination.  Anyone that brings product to market can and should trade it.  The denial of interoperability cannot happen.

With this in mind true cloud brokers will overcome the interoperability hurdle through collaboration and cooperation.   This doesn’t mean ascribing to one API framework or another, regardless of how high and mighty the leading retail cloud properties might become.   It means absolving oneself from the politics of the API game completely.

The Underlying Transport System:  Delivering the Commodity

It doesn’t always happen, but when a commodity contract comes due, something must be delivered.   The party that holds the paper for a hundred thousand units of corn must be able to take possession of it.  Modern commodity markets are supported by an elaborate network of supply chain delivery systems – from tankers to trains and transport trucks.

The equivalent underlying transport system must exist for the cloud infrastructure market.

Commodity brokers don’t own the transport system for the market.   And for good reason.  However, if you subscribe to the early analyst view of cloud brokerage, they do.   The analysts see brokers facilitating the transaction and delivering the compute commodity itself.   To me, they either don’t fully grasp the potential of the broker or they are describing something all together different.

Cloud interoperability is not a new concept.  It has been bandied about the blogosphere for several years already.  The problem to date is that such movements have been nothing more than thinly veiled product sales pitches.  The cloud brokers of the future will drive the innovation to construct the underlying transport system to “connect the clouds.”

In the final part of this series I will explore the future state of cloud computing; a world where the immovable IT asset becomes movable in a commodity exchange.

More Stories By John Cowan

John Cowan is co-founder and CEO of 6fusion. John is credited as 6fusion's business model visionary, bridging concepts and services behind cloud computing to the IT Service channel. In 2008, he along with his 6fusion collaborators successfully launched the industry's first single unit of meausurement for x86 computing, known as the Workload Allocation Cube (WAC). John is a 12 year veteran of business and product development within the IT and Telecommunications sectors and a graduate of Queen's University at Kingston.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@CloudExpo Stories
In his session at 21st Cloud Expo, James Henry, Co-CEO/CTO of Calgary Scientific Inc., introduced you to the challenges, solutions and benefits of training AI systems to solve visual problems with an emphasis on improving AIs with continuous training in the field. He explored applications in several industries and discussed technologies that allow the deployment of advanced visualization solutions to the cloud.
"There's plenty of bandwidth out there but it's never in the right place. So what Cedexis does is uses data to work out the best pathways to get data from the origin to the person who wants to get it," explained Simon Jones, Evangelist and Head of Marketing at Cedexis, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"Space Monkey by Vivent Smart Home is a product that is a distributed cloud-based edge storage network. Vivent Smart Home, our parent company, is a smart home provider that places a lot of hard drives across homes in North America," explained JT Olds, Director of Engineering, and Brandon Crowfeather, Product Manager, at Vivint Smart Home, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"Codigm is based on the cloud and we are here to explore marketing opportunities in America. Our mission is to make an ecosystem of the SW environment that anyone can understand, learn, teach, and develop the SW on the cloud," explained Sung Tae Ryu, CEO of Codigm, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"We're developing a software that is based on the cloud environment and we are providing those services to corporations and the general public," explained Seungmin Kim, CEO/CTO of SM Systems Inc., in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"We're focused on how to get some of the attributes that you would expect from an Amazon, Azure, Google, and doing that on-prem. We believe today that you can actually get those types of things done with certain architectures available in the market today," explained Steve Conner, VP of Sales at Cloudistics, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
The question before companies today is not whether to become intelligent, it’s a question of how and how fast. The key is to adopt and deploy an intelligent application strategy while simultaneously preparing to scale that intelligence. In her session at 21st Cloud Expo, Sangeeta Chakraborty, Chief Customer Officer at Ayasdi, provided a tactical framework to become a truly intelligent enterprise, including how to identify the right applications for AI, how to build a Center of Excellence to oper...
"IBM is really all in on blockchain. We take a look at sort of the history of blockchain ledger technologies. It started out with bitcoin, Ethereum, and IBM evaluated these particular blockchain technologies and found they were anonymous and permissionless and that many companies were looking for permissioned blockchain," stated René Bostic, Technical VP of the IBM Cloud Unit in North America, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Conventi...
WebRTC is great technology to build your own communication tools. It will be even more exciting experience it with advanced devices, such as a 360 Camera, 360 microphone, and a depth sensor camera. In his session at @ThingsExpo, Masashi Ganeko, a manager at INFOCOM Corporation, introduced two experimental projects from his team and what they learned from them. "Shotoku Tamago" uses the robot audition software HARK to track speakers in 360 video of a remote party. "Virtual Teleport" uses a multip...
SYS-CON Events announced today that Telecom Reseller has been named “Media Sponsor” of SYS-CON's 22nd International Cloud Expo, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. Telecom Reseller reports on Unified Communications, UCaaS, BPaaS for enterprise and SMBs. They report extensively on both customer premises based solutions such as IP-PBX as well as cloud based and hosted platforms.
DevOps promotes continuous improvement through a culture of collaboration. But in real terms, how do you: Integrate activities across diverse teams and services? Make objective decisions with system-wide visibility? Use feedback loops to enable learning and improvement? With technology insights and real-world examples, in his general session at @DevOpsSummit, at 21st Cloud Expo, Andi Mann, Chief Technology Advocate at Splunk, explored how leading organizations use data-driven DevOps to close th...
Enterprises are moving to the cloud faster than most of us in security expected. CIOs are going from 0 to 100 in cloud adoption and leaving security teams in the dust. Once cloud is part of an enterprise stack, it’s unclear who has responsibility for the protection of applications, services, and data. When cloud breaches occur, whether active compromise or a publicly accessible database, the blame must fall on both service providers and users. In his session at 21st Cloud Expo, Ben Johnson, C...
Coca-Cola’s Google powered digital signage system lays the groundwork for a more valuable connection between Coke and its customers. Digital signs pair software with high-resolution displays so that a message can be changed instantly based on what the operator wants to communicate or sell. In their Day 3 Keynote at 21st Cloud Expo, Greg Chambers, Global Group Director, Digital Innovation, Coca-Cola, and Vidya Nagarajan, a Senior Product Manager at Google, discussed how from store operations and ...
In his session at 21st Cloud Expo, Carl J. Levine, Senior Technical Evangelist for NS1, will objectively discuss how DNS is used to solve Digital Transformation challenges in large SaaS applications, CDNs, AdTech platforms, and other demanding use cases. Carl J. Levine is the Senior Technical Evangelist for NS1. A veteran of the Internet Infrastructure space, he has over a decade of experience with startups, networking protocols and Internet infrastructure, combined with the unique ability to it...
Gemini is Yahoo’s native and search advertising platform. To ensure the quality of a complex distributed system that spans multiple products and components and across various desktop websites and mobile app and web experiences – both Yahoo owned and operated and third-party syndication (supply), with complex interaction with more than a billion users and numerous advertisers globally (demand) – it becomes imperative to automate a set of end-to-end tests 24x7 to detect bugs and regression. In th...
"The reason Tier 1 companies are coming to us is we're able to narrow the gap where custom applications need to be built. They provide a lot of services, like IBM has Watson, and they provide a lot of hardware but how do you bring it all together? Bringing it all together they have to build custom applications and that's the niche that we are able to help them with," explained Peter Jung, Product Leader at Pulzze Systems Inc., in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2,...
While some developers care passionately about how data centers and clouds are architected, for most, it is only the end result that matters. To the majority of companies, technology exists to solve a business problem, and only delivers value when it is solving that problem. 2017 brings the mainstream adoption of containers for production workloads. In his session at 21st Cloud Expo, Ben McCormack, VP of Operations at Evernote, discussed how data centers of the future will be managed, how the p...
"Cloud Academy is an enterprise training platform for the cloud, specifically public clouds. We offer guided learning experiences on AWS, Azure, Google Cloud and all the surrounding methodologies and technologies that you need to know and your teams need to know in order to leverage the full benefits of the cloud," explained Alex Brower, VP of Marketing at Cloud Academy, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clar...
Data scientists must access high-performance computing resources across a wide-area network. To achieve cloud-based HPC visualization, researchers must transfer datasets and visualization results efficiently. HPC clusters now compute GPU-accelerated visualization in the cloud cluster. To efficiently display results remotely, a high-performance, low-latency protocol transfers the display from the cluster to a remote desktop. Further, tools to easily mount remote datasets and efficiently transfer...
High-velocity engineering teams are applying not only continuous delivery processes, but also lessons in experimentation from established leaders like Amazon, Netflix, and Facebook. These companies have made experimentation a foundation for their release processes, allowing them to try out major feature releases and redesigns within smaller groups before making them broadly available. In his session at 21st Cloud Expo, Brian Lucas, Senior Staff Engineer at Optimizely, discussed how by using ne...