Welcome!

@CloudExpo Authors: Cloud Best Practices Network, Elizabeth White, Jyoti Bansal, Liz McMillan, Pat Romanski

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
Adding public cloud resources to an existing application can be a daunting process. The tools that you currently use to manage the software and hardware outside the cloud aren’t always the best tools to efficiently grow into the cloud. All of the major configuration management tools have cloud orchestration plugins that can be leveraged, but there are also cloud-native tools that can dramatically improve the efficiency of managing your application lifecycle. In his session at 18th Cloud Expo, ...
The pace of innovation, vendor lock-in, production sustainability, cost-effectiveness, and managing risk… In his session at 18th Cloud Expo, Dan Choquette, Founder of RackN, discussed how CIOs are challenged finding the balance of finding the right tools, technology and operational model that serves the business the best. He also discussed how clouds, open source software and infrastructure solutions have benefits but also drawbacks and how workload and operational portability between vendors an...
With the proliferation of both SQL and NoSQL databases, organizations can now target specific fit-for-purpose database tools for their different application needs regarding scalability, ease of use, ACID support, etc. Platform as a Service offerings make this even easier now, enabling developers to roll out their own database infrastructure in minutes with minimal management overhead. However, this same amount of flexibility also comes with the challenges of picking the right tool, on the right ...
"Tintri was started in 2008 with the express purpose of building a storage appliance that is ideal for virtualized environments. We support a lot of different hypervisor platforms from VMware to OpenStack to Hyper-V," explained Dan Florea, Director of Product Management at Tintri, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
There will be new vendors providing applications, middleware, and connected devices to support the thriving IoT ecosystem. This essentially means that electronic device manufacturers will also be in the software business. Many will be new to building embedded software or robust software. This creates an increased importance on software quality, particularly within the Industrial Internet of Things where business-critical applications are becoming dependent on products controlled by software. Qua...
The speed of software changes in growing and large scale rapid-paced DevOps environments presents a challenge for continuous testing. Many organizations struggle to get this right. Practices that work for small scale continuous testing may not be sufficient as the requirements grow. In his session at DevOps Summit, Marc Hornbeek, Sr. Solutions Architect of DevOps continuous test solutions at Spirent Communications, explained the best practices of continuous testing at high scale, which is rele...
A critical component of any IoT project is what to do with all the data being generated. This data needs to be captured, processed, structured, and stored in a way to facilitate different kinds of queries. Traditional data warehouse and analytical systems are mature technologies that can be used to handle certain kinds of queries, but they are not always well suited to many problems, particularly when there is a need for real-time insights.
Containers have changed the mind of IT in DevOps. They enable developers to work with dev, test, stage and production environments identically. Containers provide the right abstraction for microservices and many cloud platforms have integrated them into deployment pipelines. DevOps and Containers together help companies to achieve their business goals faster and more effectively. In his session at DevOps Summit, Ruslan Synytsky, CEO and Co-founder of Jelastic, reviewed the current landscape of D...
In his General Session at 16th Cloud Expo, David Shacochis, host of The Hybrid IT Files podcast and Vice President at CenturyLink, investigated three key trends of the “gigabit economy" though the story of a Fortune 500 communications company in transformation. Narrating how multi-modal hybrid IT, service automation, and agile delivery all intersect, he will cover the role of storytelling and empathy in achieving strategic alignment between the enterprise and its information technology.
IoT is at the core or many Digital Transformation initiatives with the goal of re-inventing a company's business model. We all agree that collecting relevant IoT data will result in massive amounts of data needing to be stored. However, with the rapid development of IoT devices and ongoing business model transformation, we are not able to predict the volume and growth of IoT data. And with the lack of IoT history, traditional methods of IT and infrastructure planning based on the past do not app...
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, discussed the importance of WebRTC and how it enables companies to focus o...
"We're bringing out a new application monitoring system to the DevOps space. It manages large enterprise applications that are distributed throughout a node in many enterprises and we manage them as one collective," explained Kevin Barnes, President of eCube Systems, in this SYS-CON.tv interview at DevOps at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
The Internet of Things can drive efficiency for airlines and airports. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Sudip Majumder, senior director of development at Oracle, discussed the technical details of the connected airline baggage and related social media solutions. These IoT applications will enhance travelers' journey experience and drive efficiency for the airlines and the airports.
@DevOpsSummit at Cloud taking place June 6-8, 2017, at Javits Center, New York City, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long developm...
In his General Session at DevOps Summit, Asaf Yigal, Co-Founder & VP of Product at Logz.io, will explore the value of Kibana 4 for log analysis and will give a real live, hands-on tutorial on how to set up Kibana 4 and get the most out of Apache log files. He will examine three use cases: IT operations, business intelligence, and security and compliance. This is a hands-on session that will require participants to bring their own laptops, and we will provide the rest.
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
A look across the tech landscape at the disruptive technologies that are increasing in prominence and speculate as to which will be most impactful for communications – namely, AI and Cloud Computing. In his session at 20th Cloud Expo, Curtis Peterson, VP of Operations at RingCentral, will highlight the current challenges of these transformative technologies and share strategies for preparing your organization for these changes. This “view from the top” will outline the latest trends and developm...
@DevOpsSummit taking place June 6-8, 2017 at Javits Center, New York City, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. @DevOpsSummit at Cloud Expo New York Call for Papers is now open.
"There's a growing demand from users for things to be faster. When you think about all the transactions or interactions users will have with your product and everything that is between those transactions and interactions - what drives us at Catchpoint Systems is the idea to measure that and to analyze it," explained Leo Vasiliou, Director of Web Performance Engineering at Catchpoint Systems, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York Ci...
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...